The primary purpose of the liquidity ratios is to determine:
A) the extent to which borrowed funds are used to finance assets
B) the ability of the firm to meet short-term obligations to creditors
C) the extent to which assets are used to support sales
D) none of the above

Question

Quizplus · Accepted Answer

Liquidity ratios are used to determine the ability of the firm to meet short-term obligations to creditors. These ratios assess the liquidity and solvency of the company, by analyzing its ability to meet short-term obligations without the need to sell long-term assets. Thus, option B is the best choice.

The Primary Purpose of the Liquidity Ratios Is to Determine