Liquidity Ratios Address the Question of Whether a Company Can

question 21

True/False

Liquidity ratios address the question of whether a company can meet its obligations over the long term,and financial leverage ratios address the question of whether a company can meet its obligations over the short term.

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Definitions:

ATC

Average Total Cost, which is the total cost of production divided by the quantity of output produced.

AVC

Average Variable Cost; the per unit variable cost associated with producing a good or service.

AFC

Average Fixed Cost; the total fixed costs of production divided by the quantity of output produced, illustrating how fixed costs spread out over produced units.

Short Run

A period in which at least one input in the production process is fixed, limiting the ability to change production levels significantly.