Question

Your firm is a supplier to a major chain of discount stores. you have heard rumors that this chain of discount stores is in financial difficulty. which financial ratios would indicate the discount store's ability or inability to pay its short-term debts?

Answer 1

Answer:

Explanation:

The liquidity ratio indicates a company's ability to pay its short term debts.

Answer 2

Answer:

The answer would be Liquidity Ratio.

Explanation:

Liquidity Ratio is the ratio between the liquid assets of a company or organization and the Liabilities of the bank or other financial institution.

Liquidity ratio is the ability of the debtor to payoff his current financial debts without any external capital support.

So in this scenario, when our firm will look into the Liquidity ratio of the discounted store which is rumored to be in financial difficulty, we would better understand the position of that firm.