Practicing Success
There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below. Assertion (A): A firm's ability to meet its short-term financial obligations is known from liquidity ratios. |
Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A). Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of Assertion (A). Only Assertion (A) is correct. Assertion (A) is not correct but the Reason (R) is correct. |
Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A). |
Liquidity ratios are financial metrics that measure a company's ability to meet its short-term financial obligations promptly. They provide insights into the company's liquidity position and its ability to convert assets into cash to pay off short-term debts. The two most commonly used liquidity ratios are the Current Ratio and the Quick Ratio (also known as the Acid-Test Ratio). |