"A specific ratio or a number of selected ratios can be calculated and used to measure or evaluate a specific financial or operating characteristic of a firm. (a) Identify and explain what financial characteristic of a firm would be measured by an analysis in which the following four ratios were calculated: (1) current ratio; (2) acid-test ratio; (3) accounts receivable turnover ratio; and (4) inventory turnover ratio. "

Explain the solution of above question.
Add a comment

6 replies

"These four ratios are used to measure short-term liquidity and to evaluate the management of net working capital of a firm, i.e., the ability to meet financial obligations in the near future."
Add a comment
Your ratio is especially helpful to offer a perception of their chance to settle their brief-time period financial obligations (credit card debt and payables) having its short-expression assets (income, catalog, receivables). The bigger the latest ratio, greater equipped the company is of handing over its commitments.
Add a comment