Match each definition that follows with the term (a-h) it defines.
-An analysis of a company's ability to pay its current liabilities
A)Solvency
B)Leverage
C)Times interest earned
D)Horizontal analysis
E)Vertical analysis
F)Common-sized financial statements
G)Current position analysis
H)Profitability analysis

Question

Quizplus · Accepted Answer

Current position analysis is the only term that directly relates to an analysis of a company's ability to pay its current liabilities.

The other choices define the following:
A) Solvency - a company's ability to meet its long-term obligations
B) Leverage - the use of borrowed funds to increase the return on investment
C) Times interest earned - a measure of a company's ability to meet its interest payments
D) Horizontal analysis - compares financial data from multiple periods to measure changes over time
E) Vertical analysis - compares each line item on a financial statement to a base amount
F) Common-sized financial statements - financial statements where all line items are expressed as a percentage of a base amount
H) Profitability analysis - analyzing a company's ability to generate earnings relative to its expenses and other costs.

Match Each Definition That Follows with the Term (A-H) It