If an auditor is attempting to access the long-term viability of the client firm as a going concern, the auditor should attempt to calculate _________.
A)solvency ratios
B)liquidity ratios
C)price-earnings multiples
D)weighted average cost of capital

Question

Quizplus · Accepted Answer

Solvency ratios measure the ability of the company to repay its long-term debts and remain in business. These ratios help the auditor to assess the long-term viability of the company as a going concern. Liquidity ratios measure the ability of the company to meet its short-term obligations, which is not directly related to the long-term viability of the company. Price-earnings multiples are used to assess the valuation of the company, while the weighted average cost of capital represents the average cost of capital for a company and is used in the assessment of the investment decisions.

If an Auditor Is Attempting to Access the Long-Term Viability