Liquidity ratios can be used:
A)to measure the degree of protection of long-term suppliers of funds.
B)to measure borrowing capacity.
C)to measure the earning ability of a firm.
D)to measure the firm's ability to meet its current obligations.
E)to measure the worth of the firm.

Question

Quizplus · Accepted Answer

Liquidity ratios, such as the current ratio and quick ratio, are used to measure a company's ability to meet its current obligations, including paying its short-term debts and bills. They do not measure protection for long-term suppliers, borrowing capacity, earning ability, or the worth of the firm.

Liquidity Ratios Can Be Used