Importance of ratios: liquidity, solvency and profitability
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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
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Solution Summary
Your tutorial is 254 words and explains current ratio, times interest earned and return on assets.
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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 ...
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