The two categories of ratios that should be utilized to assess a firm's true liquidity are the ________.
A) liquidity and market ratios
B) liquidity and profitability ratios
C) market and debt ratios
D) liquidity and activity ratios

Question

Quizplus · Accepted Answer

Liquidity ratios measure a firm's ability to meet its short-term obligations, while activity ratios measure how efficiently a firm is using its assets to generate sales. Together, these ratios provide a more complete picture of a firm's true liquidity. Market ratios are more focused on investor perceptions of a firm's value, and debt ratios are focused on a firm's debt levels and their impact on its financial health. Profitability ratios measure a firm's ability to generate profits, but are not directly related to liquidity.

The Two Categories of Ratios That Should Be Utilized to Assess