Which type of financial ratio tells you how well a company can cover its long-termliabilities?a) efficiencyb) liquidityOc) solvencyO d)profitabilitye)profitability and efficiency

Financial ratios: Financial ratios are performance measurement methods used by the company to…

Answered: Which type of financial ratio tells you…

Business

Accounting

Which type of financial ratio tells you how well a company can cover its long-term liabilities?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 13DQ

See similar textbooks

Related questions

Q: How are current liabilities related by definition to currentassets? How are current liabilities…

A: Liabilities: The claims creditors have over assets or resources of a company are referred to as…

Q: How is the short term debt repayment capacity of a company is assessed ? Choose the INCORRECT OPTION…

A: Current ratio is the ratio of current assets to the current liabilities.

Q: What are the different types of financial ratios used in evaluating a firm's financial health?

A: The question is based on the concept of financial health of a company , financial health depend on…

Q: How does current ratio and quick ratio relate to a firm's financial profitability?

A: Current ratio and quick ratio are indirectly related to a firm's financial profitability.

Q: The minimum rate of return a firm must earn on its assets to maintain the current value of its…

A: The choice of financing makes the cost of capital a crucial variable for every company, as it will…

Q: An analyst has calculated a ratio using as the numerator the sum of operating cash fl ow, interest,…

A: This ratio is interest coverage ratio It is the profitability and debt ratio which helps to identify…

Q: What is the relationship between current liabilities and a company's operating cycle?

A: Liability: Liability is the obligation of the company to pay which comes from a past activity done…

Q: Short-term creditors would probably most interested in which ratio? a. Current ratio c.…

A: Short-term creditors are mostly interested in liquidity ratios. It means the ability of the business…

Q: what is the relationship between management of business finance and company`s financial performance…

A: Managing Business Finance means to utilize the funds of the business out of various means such as…

Q: ___ indicate the ability of the firm to meet its short-term financial obligations. a.…

A: Ratio measurement is in terms of Financial world, depicts that a sole accounting data by itself may…

Q: How does the return on common equity show the relationship between net income and the common…

A: The return on equity is the percentage earned on the equity investment made by the company. It shows…

Q: What is the quick ratio? Under what circumstances are short term creditors most likely to regard…

A: Liquidity ratios are important financial ratios which are used to determine the ability of the firm…

Q: Which of the following risk is affected largely by the debt-to-equity ratio? Liquidity risk…

A: The debt-to-equity (D/E) ratio reflects a firm's revenue obligations to its shareholder equity and…

Q: Which of the following ratios measures financial leverage? a. The return on assets ratio. b. The…

A: Answer: d. The debt to equity ratio.

Q: What are the major liquidity ratios and leverage ratios? Identify the stakeholders who are…

A: Ratio Analysis Company's liquidity, operational efficiency and profitability are measured using…

Q: a. What is the company's total book value of debt? b. The total market value? c. What is your best…

Q: What are the two essential indicators of a business's ability to pay its long-term liabilities?

A: Long-term liabilities: Long-term liabilities are obligations that the company needs to pay after…

Q: Explain the risk of investing in a company based on

A: Debt to equity ratio indicates that how much Debt is company have and how much company is having…

Q: What does issuing equity instea of debt signal about the financial health of a company?

A: Debt signaling is a theory which helps in determining the movement of stock prices. When a company…

Q: An investor worried about a company’s long-term solvency would most likely examine its:C .…

Q: he current ratio is a. calculated by dividing current liabilities by current assets. b. used to…

A: Current ratio is a liquidity ratio calculated by dividing current assets by current liabilities.…

Q: How might one establish norms (or target values)for the financial ratios of a company that is…

A: The question is based on the concept of ratio analysis used as financial analysis for a company. The…

Q: What are the importance of the following financial ratios? • Price to earnings ratio. • Earnings…

A: 1) Price earning ratio: Market price of share/ earning per share 2) Earning per share Earning…

Q: Why is the distinction between current and long term liabilities important? What would you say about…

A: The Assets are the resource that is Paramount to generate revenue. the classifications of assets…

Q: Explain how ratio analysis can be used to evaluate the business ability to pay its debt Which…

A: Ratio Analysis: It is a technique by which the financial position of a company is analyzed. This…

Q: Indicate future earnings Return on common prospects. stockholders' equity Indicate the ability to…

A: Ratios are calculated in order to compare the financial data of the company by analyzing the…

Q: Briefly describe the ratios that can be used to evaluate a company’s ability to pay long-term debt.

A: Ratio analysis: It is the financial analysis tool for measuring the profitability, liquidity,…

Q: Which of the following ratios is used to analyze a company's liquidity?

A: Earning per share, Return on assets, assets turnover ratio all are not liquidity ratios. But current…

Q: Why is a company’s capital structure, as measured by debt and equity ratios, important to financial…

Q: In order to assess a company’s ability to fulfi ll its long-term obligations, an analyst wouldmost…

A: Time to time the financial manager of the company is required to evaluate the short term as well as…

Q: What are some of the measures used to evaluate the financial stability of a company?

A: When a firm pays off all its expenses, liabilities and is running smoothly with bright future…

Q: Compute for the current ratio and describe the enterprise's capability to pay with current assets.…

A: Current ratio is the indicator of short term liquidity of the company and debt ratio indicate how…

Q: Evaluate the financial analysis of the company's working capital and long term debt.

A: Analysis of the financial statements is usually done to answer the questions of an analyst or…

Q: Evaluate the company’s solvency and capital structure using leverage ratios and interpret your…

A: Ratio Analysis - The ratio is the technique used by the prospective investor or an individual or…

Q: Assess the company’s level of liquidity and comment on its ability to meet its short-term financial…

A: By the given balance sheet and other comprehensive income statement we will calculate and process…

Q: Describe the debt-to-equity ratio and explain how creditors and owners use this ratio to evaluate a…

A: Ratio analysis is a method of analyzing a company's liquidity, profitability, and operational…

Q: No single ratio can predict the success or Failure of a company. What different types of Ratios are…

A: Different types of ratios necessary for financial analyses: 1. Working Capital ratio 2. Current…

Q: Current liabilities affect a company’s liquidity. What is liquidity, and how do we evaluate it?

A: Current liabilities are the liabilities that is paid within a year by the company.

Question

Which type of financial ratio tells you how well a company can cover its long-term
liabilities?
a) efficiency
b) liquidity
Oc) solvency
O d)
profitability
e)
profitability and efficiency

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Context:

VIEW

Answer

VIEW

Explanation:

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Which group of financial statement ratios best captures what investors think of a company’s past performance and future prospects? a. Cash flow ratios b. Liquidity ratios c. Asset management ratios d. Market value ratios e. Profitability ratios
If your goal is to determine how effective a firm in managing its assets, you would examine O Profit margin, Current ratio, Debt ratio O Price-earnings ratio, Times-interest-earned ratio, Operating Margin O Inventory turnover, Receivables turnover, Assets turnover O Quick ratio, Debt ratio, Times-interest-earned ratio
Which measures the liquidity ratio of firms? a. Earnings per share b. Net profit margin Oc. Return on Assets C. d. Average collection period
Which one of the following ratios is relevant to assess long-term solvency? A. Current Ratio B. Debt-Service Coverage Ratio C. Return on Equity D. Profit Margin
Analyze the company’s profitability and its ability to generate sufficient operating profit by using the following ratios a. Gross Profit Marginb. Operating Profit Marginc. Operating income return on investments (ROI)d. Net Profit Margin
Match the ratio to the building block of financial statement analysis to which it best relates.A. Liquidity and efficiency B. Solvency C. Profitability D. Market prospects Book value per common share
The business risk of a company is most accurately measured by the company's: a. Debt-to-equity ratio b. Efficiency in using assets to generate sales c. Operating leverage and level of uncertainly about demand output prices and competition
The business risk of a company is most accurately measured by the company's: a. Debt-to-equity ratio B. Efficiency in using assets to generate sales c. Operating leverage and level of uncertainty about demand, output prices and competition
The ability of a company to meet its long-term obligations is termed: A) Profitability B) Solvency C) Efficiency D) Liquidity
Match the ratio to the building block of financial statement analysis to which it best relates.A. Liquidity and efficiency B. Solvency C. Profitability D. Market prospects Dividend yield
Provide a Long-term Solvency Analysis for the Company based on D/E Ratio and Debt Ratio.
In the Du Pont method of analysis the two key drivers of return on equity are: a) Profit margin and return on assets b) Return on assets and the financing plan c) Profit margin and the financing plan In trying to measure a company's effectiveness in earning an adequate return on sales we would use which groups of ratios? a) Profitability ratios b) Asset utilization ratios c) Liquidity ratios