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Question : Assertion (A): A company's long-term financial position is determined by its liquidity ratios:
Reason (R): Liquidity ratios, such as the current ratio and quick ratio, are useful in determining the firm's long-term financial position.

Option 1: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)

Option 2: Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)

Option 3: Assertion (A) is true but Reason (R) is False

Option 4: Both Assertions (A) and Reason (R) are False


Team Careers360 21st Jan, 2024
Answer (1)
Team Careers360 23rd Jan, 2024

Correct Answer: Both Assertions (A) and Reason (R) are False


Solution : The quick ratio, current ratio, and days sales outstanding are common liquidity ratios.
While solvency ratios are focused on a longer-term ability to pay off ongoing debts, liquidity ratios assess a company's capacity to meet short-term obligations and cash flows.
Hence 4 is the correct answer.

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