The ………….. ratios provide the information critical to the long run operation of the firm.a.Liquidityb.Profitabilityc.Solvencyd.Activity
Question
Solution
The correct answer is b. Profitability ratios.
Profitability ratios are crucial for assessing a firm's long-term operational success, as they demonstrate the company's ability to generate earnings relative to its revenue, assets, and equity. Profitability focuses on how effective a company is at generating profit compared to its expenses and costs, making it a critical indicator of overall financial health and sustainability over the long run.
In comparison:
- Liquidity ratios measure a firm's ability to meet short-term obligations.
- Solvency ratios assess a company's long-term ability to meet its debt obligations.
- Activity ratios evaluate how efficiently a company utilizes its assets.
Thus, while all these ratios are important, profitability ratios specifically provide insights essential for the firm's long-term operations and success.
Similar Questions
ratios measure how effectively a firm is using its various resources to achieve profits.
ratios measure the degree to which a firm relies on borrowed funds in its operations.
------------------- is the type of ratio ratios give or bring out comparative facts
This refers to the relationship between a company`s stock price and earnings per share.a.Liquidity Ratiob.Price-Earnings Ratioc.Solvency Ratiod.Acid Test Ratio
ratios measure a company's ability to turn assets into cash to pay its short-term debt.
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.