Final answer:
E.Liquidity measures are ratios that assess a firm's ability to meet its short-term obligations, essential for evaluating a company's immediate financial health.
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 are critical for assessing a company's short-term financial health and its capability to meet its current obligations. Liquidity ratios like the current ratio and quick ratio are commonly used for this purpose. They help investors and creditors understand the liquidity risk associated with a company and are distinct from other types of financial ratios such as market value ratios, long-term solvency measures, asset management ratios, and profitability ratios, which serve different purposes in financial analysis.
Liquidity measures are ratios that measure a firm's ability to pay its bills over the short run without undue stress. These ratios assess a company's ability to convert its assets into cash to meet its short-term obligations.
One example of a liquidity measure is the current ratio, which compares a company's current assets to its current liabilities. A higher current ratio indicates a greater ability to pay off short-term debt obligations.
Other liquidity measures include the quick ratio and the cash ratio, which focus on a company's ability to meet its immediate liabilities using its most liquid assets.