____ indicate the ability of the firm to meet its short-term financial obligations.
A) Activity ratios
B) Liquidity ratios
C) Leverage ratios
D) Profitability ratios

Question

Quizplus · Accepted Answer

Liquidity ratios are used to measure the firm's ability to meet its short-term or immediate financial obligations. They assess the firm's ability to generate enough cash to pay for its immediate needs, such as paying off debt, meeting payroll obligations, and funding day-to-day operations. Examples of liquidity ratios include the current ratio, quick ratio, and cash ratio. Activity ratios assess how efficiently the firm is using its assets to generate revenue, leverage ratios measure the degree to which the firm uses debt to finance its operations, and profitability ratios assess the firm's ability to generate profits from its operations.

____ Indicate the Ability of the Firm to Meet Its