Question

Ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as:

a) Long-term solvency measures
b) Asset management ratios
c) Profitability ratios
d) Market value ratios
e) Liquidity measures

Answer 1

Liquidity measures are ratios that assess a firm's ability to meet its short-term obligations without undue stress.

Step-by-step explanation:

Ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as liquidity measures. These ratios assess a company's financial health in terms of how easily it can convert assets to cash to meet its short-term obligations. This is crucial for a company because it reflects the firm's ability to continue operations without interruption. Liquidity ratios such as the current ratio and the quick ratio are commonly used to evaluate liquidity.