Which of the Following Statements Is True

question 83

Multiple Choice

Which of the following statements is true?

• A)Liquidity ratios measure a company's long-term ability to pay debt.
• B)Solvency ratios measure a company's ability to repay current debt.
• C)A high liquidity ratio generally indicates that a company has a greater ability to meet its current obligations.
• D)Solvency ratios measure a company's ability to survive on a short-term basis.

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Definitions:

Operating Activities

Activities that relate to the core business operations of a company, including revenue and expense transactions.

Free Cash Flow

The amount of cash a company generates after accounting for cash outflows to support operations and maintain its capital assets.

Capital Expenditures

Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment.

Cash Dividends

Payments made out of a corporation's earnings to its shareholders, typically in the form of cash.