Which of the Following Ratios Is Rated to Be a Primary

question 26

Multiple Choice

Which of the following ratios is rated to be a primary measure of liquidity and the highest significance rating of the liquidity ratios according to commercial loan departments?

• A)Debt/Equity
• B)Current Ratio
• C)Degree of Financial Leverage
• D)Inventory Turnover in Days
• E)Accounts Receivable Turnover in Days

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Definitions:

Selling Division

A segment of a company specifically focused on sales and distribution of products or services.

Transfer Price

The price at which divisions of a company transact with each other, used for the transfer of goods and services within an organization.

Market Price

The current price at which an asset or service can be bought or sold in the marketplace, determined by the forces of supply and demand.

Marginal Cost

The financial implication of producing an extra unit of a product or service.