Which of the following ratios indicates your ability to pay current debts with existing assets that can be converted to cash quickly?
A) Solvency
B) Liquidity
C) Cash
D) Savings
E) Debt service

Question

Quizplus · Accepted Answer

Liquidity ratios indicate a company's ability to pay off short-term debts with its liquid assets, which can be quickly converted into cash. The common liquidity ratios include the current ratio and the quick ratio. Solvency ratios indicate a company's ability to meet its long-term obligations, while cash, savings, and debt service are not specific ratios related to liquidity or solvency.

Which of the Following Ratios Indicates Your Ability to Pay