Question : Which ratios provide information critical to the firm's long-term operation?
Option 1: Profitability
Option 2: Solvency
Option 3: Activity
Option 4: Liquidity
Correct Answer: Solvency
Solution : One statistic used to evaluate a company's capacity to repay its long-term financial obligations is the solvency ratio. It evaluates the ratio of a company's total debt commitments to its after-tax income, excluding non-cash depreciation charges. For the long-term operation of the company, these ratios offer the crucial information. Hence option 2 is the correct answer.
Question : With respect to the liquidity Ratio, which of the following statements is incorrect?
Question : The following groups of ratios primarily measure risk:
Question : Which of the following answers is correct? A: The average collection period can be used to assess credit and collection policies. B: The solvency ratios provide critical information for the firm's long-term operation.
Question : Which of the following is not the objective of Ratio Analysis?
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