Question : Which of the following statements is correct with respect to Creditors or Suppliers?
Option 1: Profitability of the firm in relation to investments.
Option 2: Short term solvency/liquidity of the concern.
Option 3: Effective utilization of its (firm's) resources.
Option 4: All of the above
Correct Answer: Short term solvency/liquidity of the concern.
Solution : Answer = Short-term solvency/liquidity of the concern.
Creditors or suppliers are primarily concerned about the short-term solvency or liquidity of a company. This is because they want assurance that the company will be able to meet its short-term obligations promptly. Profitability and effective resource utilization are important, but they are secondary considerations for creditors and suppliers. Hence, the correct option is 2.
Question : Which of the following statements is incorrect in respect of the analysis of the financial statement?
Option 1: Ineffective utilization of its (firm) resources.
Option 2: Effective utilization of its (firm) resources.
Option 3: Profitability of the firm in relation to investments.
Option 4: None of the above
Question : With respect to the liquidity Ratio, which of the following statements is incorrect?
Option 1: “Liquidity” refers to the ability of the firm to meet its current liabilities.
Option 2: Liquidity is the ease with which assets may be converted into cash without loss.
Option 3: The liquidity ratios are also called 'long-term Solvency Ratios'.
Option 4: Short-term trade payables of the firm are primarily interested in the liquidity ratios of the firm.
Question : The liquidity ratio is also called________?
Option 1: Long-term solvency Ratio
Option 2: Medium-term solvency Ratio
Option 3: Short-term solvency Ratio
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