Ratios that measure the degree of protection for long-term creditors and investors or the ability to meet long-term obligations are called
A) liquidity ratios.
B) activity ratios.
C) solvency ratios.
D) profitability ratios.

Question

Quizplus · Accepted Answer

Solvency ratios specifically measure a company's ability to meet long-term obligations and provide protection for long-term creditors and investors. Liquidity ratios measure a company's ability to meet short-term obligations, activity ratios measure a company's efficiency in using its resources, and profitability ratios measure a company's ability to generate profit from its operations.

Ratios That Measure the Degree of Protection for Long-Term Creditors