(a)
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.
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 Identify: The ratios for assessing the solvency characteristics of a company.
(c)
To Identify: The ratios for assessing the profitability characteristics of a company.
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Financial Accounting: Tools for Business Decision Making, 8th Edition
- 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 Equity ratioarrow_forwardUse the attached information to complete the ratio analysis. The Ratio Analysis is for Liquidity, Solvency and Profitabilityarrow_forwardDiscuss each group of ratio’s relationship to the balance sheet and income statement. Liquidity Efficiency Leverage Profitabilityarrow_forward
- What is the possible link between the following ratios: (a) profitability and efficiency (b) profitability and liquidity (c) profitability and investment and (d) efficiency and liquidityarrow_forwardMatch 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 Accounts receivable turnoverarrow_forwardMatch 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 Times interest earnedarrow_forward
- Prepare the following Ratio Analysis: 1. Liquidity ratio 2. Activity ratio 3. Solvency Ratio 4. Profitability Ratioarrow_forwardMatch 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 Acid-test ratioarrow_forwardMatch 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 sharearrow_forward
- Define liquidity ratios.arrow_forwardComputing liquidity, working captial and current ratio. Computing measures of profitability, profit margin, asset turnover, return on assets, debt to equity ratio, and return on equityarrow_forwarda. What is Liquidity Ratio? b. What is Asset Management Ratio?arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning