FINANCIAL ACCT.FUND.(LOOSELEAF)
FINANCIAL ACCT.FUND.(LOOSELEAF)
7th Edition
ISBN: 9781260482867
Author: Wild
Publisher: MCG
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Chapter 13, Problem 1E
To determine

Introduction:The liquidity ratios of the business are computed to know the short-term liquidity position of the business so that the capacity of paying the short-term liabilities can be identified. The same is computed and determined through the current ratio and acid-test ratio.

The solvency ratios suggest the long-term solvency position of the business by taking into consideration the capital structure in which the finances have been employed. The same is determined through the debt-equity ratio and times interest earned.

The profitability ratios suggest the earning capacity of the business in terms of profit margin based on sales revenue and return on total assets based on total assets of the business.

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Classification of various ratios under Liquidity, Solvency, Profitability and Market prospects.

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Identify which of the following six metrics a through f best completes questions 1 through 3 below. a. Days’ sales uncollected d. Return on total assets b. Accounts receivable turnover e. Total asset turnover c. Working capital f. Profit margin 1. Which two ratios are key components in measuring a company’s operating efficiency? Which ratio summarizes these two components? 2. What measure reflects the difference between current assets and current liabilities? 3. Which two short-term liquidity ratios measure how frequently a company collects its accounts?
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Long-term solvency is indicated by a. Current ratio b. Debt/equity ratio c. Operating ratio d. Net profit ratio

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FINANCIAL ACCT.FUND.(LOOSELEAF)

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