Your firm is a supplier to a major chain of discount stores. You have heard rumors that this chain of discount stores is in financial difficulty. Which financial ratios would indicate the discount store's ability or inability to pay its short-term debts?

Question

Quizplus · Accepted Answer

Liquidity ratios measure a company's ability to meet short-term obligations. This would include ratios such as the current ratio, quick ratio, and cash ratio, which all measure a company's ability to pay its short-term debts with its current assets. Therefore, liquidity ratios would be the best choice to determine the discount store's ability or inability to pay its short-term debts.

Your Firm Is a Supplier to a Major Chain of Discount