Which of the Following Statements About Liquidity and Solvency Ratios

question 136

Multiple Choice

Which of the following statements about liquidity and solvency ratios is correct?

• A)Unlike solvency ratios,liquidity ratios relate to the company's long-run survival.
• B)Both liquidity ratios and solvency ratios measure a company's ability to meet its financial obligations.
• C)Liquidity ratios include the return on equity ratio and the times interest earned ratio.
• D)Solvency ratios include the current ratio and the net profit margin ratio.

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Definitions:

Surplus

An excess of production or supply over demand, often leading to lower prices or an inventory accumulation.

Price Ceiling

A government-imposed limit on how high a price is charged for a product, aimed at preventing prices from reaching levels deemed too high.

Price Floor

A government or group-imposed price control or limit on how low a price can be charged for a product. It is aimed at preventing prices from being too low.

Shortage

refers to a situation where the demand for a product or service exceeds the supply available at a specific price.