Which of the following ratios measure the ability of a firm to meet short-term obligations?

Assessment: WAEC SSCE - Financial Accounting - 2005 (Objective) Subject: Financial Accounting

Question 1 Report

Which of the following ratios measure the ability of a firm to meet short-term obligations?
Answer Details
The ratio that measures the ability of a firm to meet short-term obligations is the quick asset ratio. This ratio compares a company's quick assets (cash, marketable securities, and accounts receivable) to its current liabilities. A higher quick asset ratio indicates that a company has more than enough quick assets to cover its short-term obligations. This ratio is important because it shows whether a company can pay its bills in the short term without having to sell off its long-term assets.
Read lesson note on Nature And Significance Of Accounting (JAMB)
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