Final answer:
The current ratio, quick ratio, and cash flow liquidity ratio help financial analysts assess short-term solvency.
Step-by-step explanation:
True. The financial analyst uses three ratios to assess short-term solvency. These ratios are the current ratio, the quick ratio, and the cash flow liquidity ratio.
The current ratio is calculated by dividing current assets by current liabilities. It measures a company's ability to cover short-term obligations with its short-term assets.
The quick ratio, also known as the acid-test ratio, is a stricter measure of short-term solvency. It excludes inventory from current assets, as it may not be easily converted into cash.
The cash flow liquidity ratio assesses a company's ability to generate cash flow from its operations to cover short-term obligations. It is calculated by dividing cash flow from operations by current liabilities.