The ratio which measures the solvency of a firm is the

Assessment: WAEC SSCE - Financial Accounting - 2000 (Objective) Subject: Financial Accounting

Question 1 Report

The ratio which measures the solvency of a firm is the
Answer Details
The ratio which measures the solvency of a firm is the quick ratio. The quick ratio is also known as the acid-test ratio. It is used to determine a company's ability to pay off its current liabilities immediately, using only its most liquid assets such as cash, marketable securities and accounts receivable. It excludes inventory because inventory is not easily converted to cash in the short term. A high quick ratio indicates that the company has enough liquid assets to cover its short-term obligations and is therefore considered financially solvent.
Read lesson note on Stock Valuation (JAMB)
Read lesson note on Nature And Significance Of Accounting (JAMB)
View Answer

Related Questions

1

In a bonus issue of one new share for every four held, a holder of 100,000 shares will get additional shares of
2

Williams and Jacob are in partnership but there is no partnership agreement. The capital contributed are N60,000 and N40,000 respectively. Profit for the yea...
3

Williams and Jacob are in partnership but there is no partnership agreement. The capital contributed are N60,000 and N40,000 respectively. Profit for the yea...
4

A partner who has full power of participating in the conduct of a partnership business is a
5

Closing stock was overstated. The effect is that
6

Williams and Jacob are in partnership but there is no partnership agreement. The capital contributed are N60,000 and N40,000 respectively. Profit for the yea...
7

Williams and Jacob are in partnership but there is no partnership agreement. The capital contributed are N60,000 and N40,000 respectively. Profit for the yea...
8

When goods are purchased on account, the accounting entries are

Download The App On Google Playstore

Everything you need to excel in your exams

Green Bridge CBT Mobile App
Personalized AI Learning Chat Assistant
200,000+ Exam Questions Across IGCSE, JAMB, WAEC & NECO
Over 3,900 Lesson Notes
Offline Support - Learn Anytime, Anywhere
Green Bridge Timetable
Literature Summaries & Potential Questions
Track Your Performance & Progress
In-depth Explanations for Comprehensive Learning