The Main Purpose of Liquidity Ratios Is to Determine Whether

question 57

True/False

The main purpose of liquidity ratios is to determine whether a company will be able to repay its debts as they come due.

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Definitions:

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.

Investing Activities

Transactions involving the purchase and sale of long-term assets and other investments not considered cash equivalents.

Free Cash Flow

The cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. It's an important measure of financial health.