Small business owner Barry Shain has always paid all of his current bills on time. However, this year he has more bills coming due than normal. Which type of ratio would help him evaluate whether he is likely to have enough cash to continue meeting his obligations over the next year?
A) liquidity ratio
B) managerial ratio
C) leverage ratio
D) profitability ratio

Question

Quizplus · Accepted Answer

Liquidity ratios help measure a company's ability to meet its short-term obligations by comparing its current assets to its current liabilities. This would help Barry Shain evaluate whether he has enough cash to continue meeting his obligations over the next year, given that he has more bills coming due than normal.

Small Business Owner Barry Shain Has Always Paid All of His