The Two Categories of Ratios That Should Be Utilized to Assess

question 41

Multiple Choice

The two categories of ratios that should be utilized to assess a firm's true liquidity are the ________.

• A) liquidity and market ratios
• B) liquidity and profitability ratios
• C) market and debt ratios
• D) liquidity and activity ratios

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Definitions:

Transactions

Events that are recognized in the financial records, affecting the financial position and performance of a company.

Accrual Basis

An accounting method where transactions are recorded when they are earned or incurred, regardless of when cash is exchanged.

Cash Basis

An accounting method where revenues and expenses are recorded only when cash is received or paid out.

Accounting

The systematic process of recording, measuring, and communicating financial information to help in decision-making.