A Liquidity Ratio Measures the

question 106

Multiple Choice

A liquidity ratio measures the

• A) income or operating success of an enterprise over a period of time.
• B) ability of the enterprise to survive over a long period of time.
• C) short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash.
• D) number of times interest is earned.

---

Definitions:

Retained Earnings

This part of shareholders' equity reflects the accumulated net income retained for reinvestment in the business, rather than being paid out in dividends.

Paid-In Capital

The total amount of capital that shareholders have directly contributed to a company in exchange for shares.

Stockholders' Claim

Represents the shareholders' ownership interest in a company's assets, usually after debts and liabilities have been settled.

Authorized Stock

The amount of stock that a corporation is authorized to sell as indicated in its charter.