_____ Ratios Measure the Relative Risk That a Business Setback

question 56

Multiple Choice

_____ ratios measure the relative risk that a business setback could cause bankruptcy.

• A) Liquidity
• B) Gross margin
• C) Leverage
• D) Profitability

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Definitions:

Temporary Accounts

Accounts that are closed at the end of each accounting period, including revenue, expense, and withdrawal accounts.

Zero Balances

Accounts in financial statements that have no outstanding balance or value at a given point in time.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances in temporary accounts to permanent accounts, preparing the books for the next accounting period.

Adjusting Entries

Entries in the books of accounts made during the final part of an accounting cycle to distribute profits and costs to their rightful period.