Purchase Solution

Importance of ratios: liquidity, solvency and profitability

Not what you're looking for?

Ask Custom Question

In reviewing the financial statements of a company there are many different ratios for us to choose from. Please discuss the importance of a ratio that looks at liquidity, solvency and profitability. Thanks

Purchase this Solution

Solution Summary

Your tutorial is 254 words and explains current ratio, times interest earned and return on assets.

Solution Preview

Liquidity

Liquidity is the ability to pay upcoming vendor bills, payroll, and short term debt as opposed to solvency which is the ability to repay debt in the long run.

Current ratio

Current assets / current liabilities

This is an important ratio because it lets the firm know if they have enough cash or near-cash to pay the items that will need to be satisfied within the upcoming ...

Solution provided by:
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
Recent Feedback
  • "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
  • "Thank, this is more clear to me now."
  • "Awesome job! "
  • "ty"
  • "Great Analysis, thank you so much"
Purchase this Solution


Free BrainMass Quizzes
Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.