Which of the following statements about liquidity and solvency ratios is/are true? Statement I. The current ratio expresses the capability of a firm's current assets to cover its current liabilities without resorting to selling its long-term assets to cover its current obligations. Statement II. A higher debt to equity ratio means that the financing aspect of the business comes more from its debtors than from its equity holders. Statement III. In computing for the quick ratio, highly liquid assets such as marketable securities should be excluded from the numerator. Statement IV. Solvency refers to how quick, efficient, and cheap it is to convert a security into cash. a. I only b. I and II c. I and III d. I and IV
Which of the following statements about liquidity and solvency ratios is/are true? Statement I. The current ratio expresses the capability of a firm's current assets to cover its current liabilities without resorting to selling its long-term assets to cover its current obligations. Statement II. A higher debt to equity ratio means that the financing aspect of the business comes more from its debtors than from its equity holders. Statement III. In computing for the quick ratio, highly liquid assets such as marketable securities should be excluded from the numerator. Statement IV. Solvency refers to how quick, efficient, and cheap it is to convert a security into cash. a. I only b. I and II c. I and III d. I and IV
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 10P
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29.Which of the following statements about liquidity and solvency ratios is/are true?
Statement I. The current ratio expresses the capability of a firm's current assets to cover its current liabilities without resorting to selling its long-term assets to cover its current obligations.
Statement II. A higher debt to equity ratio means that the financing aspect of the business comes more from its debtors than from its equity holders.
Statement III. In computing for the quick ratio, highly liquid assets such as marketable securities should be excluded from the numerator.
Statement IV. Solvency refers to how quick, efficient, and cheap it is to convert a security into cash.
Statement I. The current ratio expresses the capability of a firm's current assets to cover its current liabilities without resorting to selling its long-term assets to cover its current obligations.
Statement II. A higher debt to equity ratio means that the financing aspect of the business comes more from its debtors than from its equity holders.
Statement III. In computing for the quick ratio, highly liquid assets such as marketable securities should be excluded from the numerator.
Statement IV. Solvency refers to how quick, efficient, and cheap it is to convert a security into cash.
a. I only
b. I and II
c. I and III
d. I and IV
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