Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 10 - Reporting and Analyzing Liabilities - Questions: 20

Answer

a) Liquidity means company's short term ability to pay its maturing obligations and to meet unexpected needs for cash. b) Solvency means company's ability to survive over a long period of time

Work Step by Step

a)Company's liquidity can be measured from the following ratios: Current ratio. Current cash debt coverage ratio Inventory turnover ratio Receivables turnover ratio b) Company's solvency can be measured from the following ratios: Debt to total assets ratio Cash debt coverage ratio Times interest earned ratio
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