Which of the Following Groups of Ratios Measure a Company's

question 21

Multiple Choice

Which of the following groups of ratios measure a company's ability to pay its long-term debt?

• A)Current ratio and debt ratio
• B)Debt ratio, times-interest-earned ratio and rate of return on total assets
• C)Current ratio and acid-test ratio
• D)Debt ratio and times-interest earned ratio

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Definitions:

Ultramares Rule

The Ultramares rule is a legal doctrine relating to negligence, limiting the liability of auditors to third parties for financial report errors, except in cases of fraud or gross negligence.

Accountant Liability

Refers to the legal obligation of accountants to perform their duties in accordance with laws and professional standards, under which failure can result in legal or professional penalties.

Privity Rule

A legal principle stating that contracts cannot confer rights or impose obligations upon any person who is not a party to the contract.

Gross Negligent Fraud

Extreme carelessness or reckless disregard for the truth or for the rights of others, often involving fraudulent intentions or outcomes.