Which of the following ratios indicates your ability to meet current debt payments with existing assets that can be converted to cash readily?
A)Solvency
B)Liquidity
C)Cash
D)Savings
E)Debt service

Question

Quizplus · Accepted Answer

Liquidity ratios, such as the current ratio and quick ratio, indicate a company's ability to pay off current debt obligations with its current assets, which are assets that can be converted to cash readily. Solvency ratios, such as the debt-to-equity ratio, indicate a company's ability to meet long-term debt obligations. Cash, savings, and debt service are not ratios used to evaluate a company's ability to meet debt payments.

Which of the Following Ratios Indicates Your Ability to Meet