Question : The following groups of ratios primarily measure risk:
Option 1: Liquidity, activity and profitability
Option 2: Liquidity, activity and debt
Option 3: Liquidity, debt and profitability
Option 4: Liquidity, activity and common stock
Correct Answer: Liquidity, debt and profitability
Solution : Liquidity Ratio : You can discover if you have the capacity to meet your forthcoming obligations by looking at your liquidity ratio. This typically indicates you have enough cash on hand, in your bank account, or in assets that can be rapidly converted into cash to cover your expenses. If you don't, your company can experience problems and perhaps have to stop operating.
Debt ratios indicate how much a company borrows to finance its activities. They may also be applied to examine a party's capacity to repay a loan. Investors that have stock ownership in a company may be at danger if the debt level is too high, thus these ratios are crucial.
Profitibility Ratio : An annual or quarterly analysis of your company's profitability ratios gives you insight into how it is doing. These ratios can be compared throughout time to provide insight into current tactics as well as provide an explanation for years with subpar financial performance.
Hence the correct answer is option 3.
Related Questions
Trending Articles/News
