Explain How Financial Ratios May Be Used to Predict Bankruptcy

question 80

Essay

Explain how financial ratios may be used to predict bankruptcy.

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Definitions:

Other Income

Revenues earned from activities that are not related to a company's primary business operations.

Income Statement

A financial statement that shows a company's revenues, expenses, and profit or loss over a specific time period.

Liquidated

The process of converting assets into cash or cash equivalents by selling them in order to pay off debts and liabilities.

Preferred Stockholders

Investors who own shares in a company that have preferential rights over common stockholders, typically regarding dividends and assets upon liquidation.