Classification of Financial ratios : Financial ratios that exhibit the relationship among various financial data of the financial statements of a business, are broadly classified into three categories; Profitability Ratios Liquidity Ratios Solvency Ratios Profitability Ratio : Profitability ratio exhibits how the business is able to earn income for a specific period of time. Liquidity Ratio : Liquidity ratio exhibits how the business is able to meet its short-term obligations and any emergency need of funds. Solvency Ratio : Solvency ratio exhibits how the business is able to sustain over a long period of time. To Identify : The ratios for assessing the liquidity characteristics of a company.

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Answer 1

Question

Chapter 2, Problem 7Q

(a)

To determine

Classification of Financial ratios: Financial ratios that exhibit the relationship among various financial data of the financial statements of a business, are broadly classified into three categories;

Profitability Ratios

Liquidity Ratios

Solvency Ratios

Profitability Ratio: Profitability ratio exhibits how the business is able to earn income for a specific period of time.

Liquidity Ratio: Liquidity ratio exhibits how the business is able to meet its short-term obligations and any emergency need of funds.

Solvency Ratio: Solvency ratio exhibits how the business is able to sustain over a long period of time.

To Identify: The ratios for assessing the liquidity characteristics of a company.

(b)

To determine

To Identify: The ratios for assessing the solvency characteristics of a company.

(c)

To determine

To Identify: The ratios for assessing the profitability characteristics of a company.

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Answer 2

Question

Chapter 2, Problem 7Q

(a)

To determine

Classification of Financial ratios: Financial ratios that exhibit the relationship among various financial data of the financial statements of a business, are broadly classified into three categories;

Profitability Ratios

Liquidity Ratios

Solvency Ratios

Profitability Ratio: Profitability ratio exhibits how the business is able to earn income for a specific period of time.

Liquidity Ratio: Liquidity ratio exhibits how the business is able to meet its short-term obligations and any emergency need of funds.

Solvency Ratio: Solvency ratio exhibits how the business is able to sustain over a long period of time.

To Identify: The ratios for assessing the liquidity characteristics of a company.

(b)

To determine

To Identify: The ratios for assessing the solvency characteristics of a company.

(c)

To determine

To Identify: The ratios for assessing the profitability characteristics of a company.

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Answer 3

Question

Chapter 2, Problem 7Q

(a)

To determine

Classification of Financial ratios: Financial ratios that exhibit the relationship among various financial data of the financial statements of a business, are broadly classified into three categories;

Profitability Ratios

Liquidity Ratios

Solvency Ratios

Profitability Ratio: Profitability ratio exhibits how the business is able to earn income for a specific period of time.

Liquidity Ratio: Liquidity ratio exhibits how the business is able to meet its short-term obligations and any emergency need of funds.

Solvency Ratio: Solvency ratio exhibits how the business is able to sustain over a long period of time.

To Identify: The ratios for assessing the liquidity characteristics of a company.

(b)

To determine

To Identify: The ratios for assessing the solvency characteristics of a company.

(c)

To determine

To Identify: The ratios for assessing the profitability characteristics of a company.

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Answer 4

Question

Chapter 2, Problem 7Q

(a)

To determine

Classification of Financial ratios: Financial ratios that exhibit the relationship among various financial data of the financial statements of a business, are broadly classified into three categories;

Profitability Ratios

Liquidity Ratios

Solvency Ratios

Profitability Ratio: Profitability ratio exhibits how the business is able to earn income for a specific period of time.

Liquidity Ratio: Liquidity ratio exhibits how the business is able to meet its short-term obligations and any emergency need of funds.

Solvency Ratio: Solvency ratio exhibits how the business is able to sustain over a long period of time.

To Identify: The ratios for assessing the liquidity characteristics of a company.

(b)

To determine

To Identify: The ratios for assessing the solvency characteristics of a company.

(c)

To determine

To Identify: The ratios for assessing the profitability characteristics of a company.

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Answer 5

Chapter 2, Problem 7Q

(a)

To determine

Classification of Financial ratios: Financial ratios that exhibit the relationship among various financial data of the financial statements of a business, are broadly classified into three categories;

Profitability Ratios

Liquidity Ratios

Solvency Ratios

Profitability Ratio: Profitability ratio exhibits how the business is able to earn income for a specific period of time.

Liquidity Ratio: Liquidity ratio exhibits how the business is able to meet its short-term obligations and any emergency need of funds.

Solvency Ratio: Solvency ratio exhibits how the business is able to sustain over a long period of time.

To Identify: The ratios for assessing the liquidity characteristics of a company.

(b)

To determine

To Identify: The ratios for assessing the solvency characteristics of a company.

(c)

To determine

To Identify: The ratios for assessing the profitability characteristics of a company.

Answer 6

Chapter 2, Problem 7Q

(a)

To determine

Classification of Financial ratios: Financial ratios that exhibit the relationship among various financial data of the financial statements of a business, are broadly classified into three categories;

Profitability Ratios

Liquidity Ratios

Solvency Ratios

Profitability Ratio: Profitability ratio exhibits how the business is able to earn income for a specific period of time.

Liquidity Ratio: Liquidity ratio exhibits how the business is able to meet its short-term obligations and any emergency need of funds.

Solvency Ratio: Solvency ratio exhibits how the business is able to sustain over a long period of time.

To Identify: The ratios for assessing the liquidity characteristics of a company.

Answer 7

Chapter 2, Problem 7Q

(a)

To determine

Classification of Financial ratios: Financial ratios that exhibit the relationship among various financial data of the financial statements of a business, are broadly classified into three categories;

Profitability Ratios

Liquidity Ratios

Solvency Ratios

Profitability Ratio: Profitability ratio exhibits how the business is able to earn income for a specific period of time.

Liquidity Ratio: Liquidity ratio exhibits how the business is able to meet its short-term obligations and any emergency need of funds.

Solvency Ratio: Solvency ratio exhibits how the business is able to sustain over a long period of time.

To Identify: The ratios for assessing the liquidity characteristics of a company.

Answer 8

(b)

To determine

To Identify: The ratios for assessing the solvency characteristics of a company.

Answer 9

(b)

To determine

To Identify: The ratios for assessing the solvency characteristics of a company.

Answer 10

(c)

To determine

To Identify: The ratios for assessing the profitability characteristics of a company.

Answer 11

(c)

To determine

To Identify: The ratios for assessing the profitability characteristics of a company.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 2 - What is meant by the term operating cycle?Ch. 2 - Define current assets. What basis is used for...Ch. 2 - Prob. 3Q Ch. 2 - Prob. 4Q Ch. 2 - Prob. 5Q Ch. 2 - Prob. 6Q Ch. 2 - Prob. 7Q Ch. 2 - Prob. 8Q Ch. 2 - What do these classes of ratios measure? (a)...Ch. 2 - Prob. 10Q

Solution Summary: The author explains how financial ratios exhibit the relationship among various financial data of the financial statements of a business.

To Identify: The ratios for assessing the solvency characteristics of a company.

To Identify: The ratios for assessing the profitability characteristics of a company.

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Chapter 2 Solutions