Indicate Whether Each of the Following Ratios Are Better Measures

question 17

Essay

Indicate whether each of the following ratios are better measures of liquidity (L), solvency (S), or profitability (P).

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Definitions:

Floatation Costs

Flotation costs are the expenses incurred by a company in issuing new securities, including fees and commissions paid to underwriters, legal fees, and registration fees.

After-Tax Cost of Debt

This refers to the net cost of debt considering the effect of taxes, representing the actual financial cost of debt to a company after tax deductions.

Yield-to-Maturity

The total anticipated return on a bond if held until it matures, accounting for its current market price, face value, interest payments, and time to maturity.

Marginal Tax Rate

The rate at which the next dollar of taxable income will be taxed.