The following groups of ratios provide the information critical to the short-run operation of the firm:
A) liquidity, activity, and common stock.
B) liquidity, activity, and debt.
C) liquidity, activity, and profitability.
D) activity, debt, and profitability.

Question

Quizplus · Accepted Answer

In the short run, a firm's ability to meet its immediate obligations and maintain its operations depends on its liquidity ratios (such as current ratio and quick ratio), activity ratios (such as inventory turnover and accounts receivable turnover), and profitability ratios (such as net profit margin and return on assets). Debt ratios are more important for long-term financial planning and not as critical for short-run operation. Common stock ratios are also not as crucial for operational decisions in the short run.

The Following Groups of Ratios Provide the Information Critical to the Short-Run