Your firm is a supplier to a major chain of discount stores.You have heard rumors that this chain of discount stores is in some financial difficulty.Which financial ratios would indicate the discount stores' ability to pay their short-term debts?

Question

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Liquidity ratios would indicate the discount stores' ability to pay their short-term debts as they measure the company's ability to meet its short-term obligations. Ratios such as the current ratio, quick ratio, and cash ratio would give insight into the company's liquidity and ability to pay its short-term debts. Leverage ratios, activity ratios, and profitability ratios focus on different aspects of a company's financial health, but are not directly related to its ability to pay short-term debts.

Your Firm Is a Supplier to a Major Chain of Discount