Which of the following scenarios would most likely occur with a company that has reported disappointing earnings recently but still looks to be financially stable for quite some time?
A) High long-term solvency ratio but low profitability ratio
B) High short-term solvency ratio but low profitability ratio
C) High long-term solvency ratio but low activity ratio
D) High short-term solvency ratio but low activity ratio
E) High long-term solvency ratio but low short-term solvency ratio

Question

Quizplus · Accepted Answer

A high long-term solvency ratio indicates that the company has a strong ability to meet its long-term obligations, while a low profitability ratio suggests that the company is not currently generating sufficient profits. This scenario is most likely to occur when a company has reported disappointing earnings recently but still looks to be financially stable for quite some time.

Which of the Following Scenarios Would Most Likely Occur with a Company