Liquidity Ratios Measure the Short-Term Ability of a Company to Pay

question 35

True/False

Liquidity ratios measure the short-term ability of a company to pay its maturing obligations and meet unexpected needs for cash.

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Definitions:

Ending Inventory

The value of goods available for sale at the close of an accounting period.

Net Income

A company's earnings after deducting expenses and taxes from the total sales.

Overstatement

When the reported amount or value of an asset, expense, or income is higher than the real amount.

Periodic Inventory System

An inventory system in which ending inventory and cost of goods sold are determined at the end of the accounting period based on a physical inventory count.