Having Achieved an Understanding of a Corporation's Business Risk and Corporate

question 15

True/False

Having achieved an understanding of a corporation's business risk and corporate governance risk, the rating agencies move on to assessing financial risk, which involves traditional ratio analysis and other factors affecting the firm's financing.

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Definitions:

Current Ratio

It's a measure used to determine a business's capacity to fulfill obligations due in less than one year, through a calculation of current assets over current liabilities.

Acid-Test Ratio

A financial metric that measures the ability of a company to pay off its short-term liabilities with its quick assets.

Year-End Information

Data and records compiled at the end of a fiscal year used for accounting and tax purposes, including final balances, inventories, and financial statements.

Perpetual Inventory System

An accounting method that continuously updates inventory records for sales and purchases, providing a highly current account of inventory on hand.