Which of the following statements about liquidity and solvency ratios is correct?
A)Unlike solvency ratios,liquidity ratios relate to the company's long-run survival.
B)Both liquidity ratios and solvency ratios measure a company's ability to meet its financial obligations.
C)Liquidity ratios include the return on equity ratio and the times interest earned ratio.
D)Solvency ratios include the current ratio and the net profit margin ratio.

Question

Quizplus · Accepted Answer

Liquidity ratios relate to the company's short-term survival,in particular,the company's ability to use current assets to repay liabilities as they become due.Solvency ratios relate to the company's long-run survival,in particular,the company's ability to repay lenders when debt matures and to make the required interest payments prior to the date of maturity.

Which of the Following Statements About Liquidity and Solvency Ratios