{"id":8718,"date":"2024-04-15T03:05:06","date_gmt":"2024-04-15T03:05:06","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=8718"},"modified":"2024-04-15T03:05:06","modified_gmt":"2024-04-15T03:05:06","slug":"the-ratios-that-refer-to-the-ability-of-the-firm-to-meet-the-short-term-obligations-out-of-its-short-term-resources-a-liquidity-ratio-b-leverage-ratio-c-activity-ratio-d-profitability-ratio","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/the-ratios-that-refer-to-the-ability-of-the-firm-to-meet-the-short-term-obligations-out-of-its-short-term-resources-a-liquidity-ratio-b-leverage-ratio-c-activity-ratio-d-profitability-ratio\/","title":{"rendered":"The ratios that refer to the ability of the firm to meet the short term obligations out of its short term resources A. Liquidity ratio B. Leverage ratio C. Activity ratio D. Profitability ratio"},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a990d851baaa\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"true\">\r\n                    Liquidity ratio                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"false\">\r\n                    Leverage ratio                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"false\">\r\n                    Activity ratio                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option4\" data-is-correct=\"false\">\r\n                    Profitability ratio                <\/div>\r\n                            \r\n            <!-- Feedback messages for non-AMP -->\r\n            <div class=\"feedback\" data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is: A. Liquidity ratio.<\/p>\n<p>Liquidity ratios are a type of financial ratio that measures a company&#8217;s ability to meet its short-term obligations. They are calculated by dividing a company&#8217;s current assets by its current liabilities. The higher the liquidity ratio, the more liquid the company is, and the better able it is to meet its short-term obligations.<\/p>\n<p>There are several different types of liquidity ratios, including the current ratio, the quick ratio, and the cash ratio. The current ratio is the most common liquidity ratio, and it is calculated by dividing a company&#8217;s current assets by its current liabilities. The quick ratio is similar to the current ratio, but it excludes inventory from current assets. The cash ratio is the most conservative liquidity ratio, and it is calculated by dividing a company&#8217;s cash and cash equivalents by its current liabilities.<\/p>\n<p>Liquidity ratios are important because they can help investors and creditors assess a company&#8217;s ability to meet its short-term obligations. A company with a high liquidity ratio is generally considered to be a <div class=\"telegram-channel-container\">\r\n        <a href=\"https:\/\/t.me\/pscnotes2025\" target=\"_blank\" class=\"telegram-channel-button\">\r\n            <span class=\"telegram-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 496 512\">\r\n                    <path fill=\"white\" d=\"M248,8C111,8,0,119,0,256s111,248,248,248s248-111,248-248S385,8,248,8z M362,177L320,367c-3,14-10,18-20,14l-56-41l-27,26 c-3,3-5,5-10,5l4-63L323,196c5-5-1-7-8-3l-98,62l-42-13c-9-3-10-9,2-14l162-63C351,160,365,164,362,177z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Join Our Telegram Channel\r\n        <\/a>\r\n    <\/div> good investment or credit risk, while a company with a low liquidity ratio is generally considered to be a poor investment or credit risk.<\/p>\n<p>Here is a brief explanation of each of the options:<\/p>\n<ul>\n<li><strong>Leverage ratio<\/strong> measures the extent to which a company uses debt to finance its assets. A high leverage ratio indicates that a company <div class=\"youtube-subscribe-container\">\r\n        <a href=\"https:\/\/www.youtube.com\/channel\/UCNHT8lW-JmLC68rjBfZhdkg?sub_confirmation=1\" target=\"_blank\" class=\"youtube-subscribe-button\">\r\n            <span class=\"youtube-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 576 512\">\r\n                    <path d=\"M549.7 124.1c-6.3-23.7-24.8-42.3-48.3-48.6C458.8 64 288 64 288 64S117.2 64 74.6 75.5c-23.5 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Subscribe on YouTube\r\n        <\/a>\r\n    <\/div> is using a lot of debt, which can be risky if the company is unable to make its debt payments.<\/li>\n<li><strong>Activity ratio<\/strong> measures how efficiently a company uses its assets. A high activity ratio indicates that a company is using its assets efficiently, which can lead to higher profits.<\/li>\n<li><strong>Profitability ratio<\/strong> measures how profitable a company is. A high profitability ratio indicates that a company is generating a lot of profit from its sales.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Subscribe on YouTube<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[85],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The ratios that refer to the ability of the firm to meet the short term obligations out of its short term resources A. Liquidity ratio B. Leverage ratio C. Activity ratio D. 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