When financial information is used for control purposes,_____ indicate how well an organization will be able to meet its short-term financial obligation.
A) liquidity ratios
B) profitability ratios
C) activity ratios
D) debt ratios
E) leverage ratios

Question

Quizplus · Accepted Answer

Liquidity ratios measure the ability of an organization to meet its short-term financial obligations. Therefore, they are the most appropriate ratio for control purposes when assessing short-term financial viability. Profitability ratios measure the ability of an organization to generate profits, while activity ratios measure how efficiently an organization uses its resources. Debt and leverage ratios measure an organization's ability to manage long-term debt, which is not the primary concern for control purposes.

When Financial Information Is Used for Control Purposes,_____ Indicate How