What do these classes of ratios measure?
A) Liquidity ratios.
B) Profitability ratios.
C) Solvency ratios.
Financial ratios are ratios that are usually calculated from past or historical data. The various categories of financial ratios are:
- Liquidity ratios.
- Solvency ratios.
- 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.
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from Geometry: High SchoolChapter 7 / Lesson 1