alleryStart learning →Ratios are classified by what they measure. Which set names those four classes?
ACash, inventory, receivables and payables
BSelling, general, administrative and tax
CPrimary, secondary, broker and dealer
DLiquidity, profitability, activity and debt
Answer & Solution
Correct answer: D. Liquidity, profitability, activity and debt
1. Ratios are grouped by what they measure.
2. The four groups are liquidity, profitability, activity and debt ratios.
3. Liquidity ratios look at short-term debts, profitability ratios at how well resources generate profit, activity ratios at how well assets are used, and debt ratios at borrowed funds.
4. Cash and inventory are account names rather than ratio families, and broker and dealer describe securities markets.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 14 "Using Financial Information and Accounting", section 14.7 Analyzing Financial Statements_
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