Chapter 10, Problem 19Q

(a)

To determine

Long-term liabilities

Long-term liabilities are obligations that the company needs to pay after at least one year or more. Long term liabilities are otherwise called as long-term debt. Examples of long-term liabilities are long-term bonds, long-term notes payable.

To state: The requirements for the financial statement presentation of long-term liabilities.

(b)

To determine

Liquidity ratios

Liquidity ratios measure the short-term capacity of a company to pay its maturing obligations and to meet unanticipated requirements for cash. Liquidity ratios are current ratio, working capital ratio, acid test ratio and more.

Solvency ratios

Solvency ratios measure the capacity of a company to sustain over a long period of time. Solvency ratios are debt to assets ratio, time interest earned ratio, and debt to equity ratio, and more.

To state: the ratios that may be computed to evaluate a company’s liquidity and solvency.