Analysts Use Measures of Long-Term Liquidity Risk to Evaluate a Firm's

question 137

True/False

Analysts use measures of long-term liquidity risk to evaluate a firm's ability to meet interest and principal payments on long-term debt and similar obligations as they come due.If a firm cannot make the payments on time, it becomes insolvent and may have to reorganize or liquidate.

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Definitions:

Accounts Payable

Money owed by a company to its suppliers or vendors for goods and services received but not yet paid for.

Accounts Affected

The specific accounts in the general ledger that are impacted by financial transactions.

Financial Statement

A summary report that quantitatively describes the financial health of a company, including income statements, balance sheets, and cash flow statements.

Normal Balance

The normal balance is the side (debit or credit) of an account that is normally expected to have a higher balance.