Concept explainers
(a)
Liquidity ratios
Liquidity ratios measure the short-term capacity of a company to pay its maturing obligations and to meet unanticipated requirements for cash. Liquidity ratios are
Solvency ratios
Solvency ratios measure the capacity of a company to sustain over a long period of time. Solvency ratios are debt to assets ratio, time interest earned ratio, and debt to equity ratio, and so on.
Current cash debt coverage ratio:
It is a
Cash debt coverage ratio:
It is a solvency ratio which defines the relationship between operating
To Compute: liquidity ratio of P Corporation and S Corporation and compare.
(b)
To Compute: solvency ratio of P Corporation and S Corporation and compare.
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