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Identify which of the stated ratio or item that is least important as a measure of short-term liquidity.
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Answer to Problem 1STQ
c. Debt ratio.
Explanation of Solution
Option a. Quick ratio: The
Option b.
Option c. Debt ratio: The debt ratio shows the relationship between total asset and the total liability of the company. Debt ratio reflects the financial strategy of the company. It is used to measure the percentage of company’s assets that are financed by long term debts.
Option d.
From the above explanation, Options (a), (b) and (c) are incorrect answers. Thus, the correct answer is Option (c).
Hence, the correct answer is Option c. Debt ratio.
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Chapter 14 Solutions
Financial Accounting
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