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What do these classes of ratios measure? A) Liquidity ratios. B) Profitability ratios. C)...

Question:

What do these classes of ratios measure?

A) Liquidity ratios.

B) Profitability ratios.

C) Solvency ratios.

Financial Ratios:

Financial ratios are ratios that are usually calculated from past or historical data. The various categories of financial ratios are:

  1. Liquidity ratios.
  2. Solvency ratios.
  3. Profitability ratios.

Answer and Explanation:

(A) Liquidity ratios.

The liquidity ratios measure the capability of a firm to pay a debt within a year.


(B) Profitability ratios.

Profitability ratios measure the level of the rofit or the level of profit that a firm has achieved in a certain period. \\ __(C) Solvency ratios.__ These are ratios that help to evaluate the possibility of a business to repay the interest on loans and the principle amount upon reaching maturity.


Learn more about this topic:

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Ratios and Proportions: Definition and Examples

from Geometry: High School

Chapter 7 / Lesson 1
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