Question

The primary purpose of the liquidity ratios is to determine: the extent to which borrowed funds are used to finance assets the ability of the firm to meet short-term obligations to creditors the extent to which assets are used to support sales none of the above

Answer 1

Answer:

The correct answer is The ability of the firm to meet short-term obligations to creditors.

Explanation:

The liquidity index is one of the most important elements in the financial analysis company, when it indicates the availability of liquidity available to the company.

The operation of the company depends on the liquidity that the company has to fulfill its financial obligations, with its suppliers, with its employees, with the capacity it has to renew its technology, to expand its industrial capacity, to acquire raw material, etc.

That is why the company needs to measure more or less accurately its true financial capacity to support all its needs and obligations.

The most commonly used liquidity indicators are:

• Working capital
• The current reason
• Acid test
• EBITDA