Doubts

SOLUTION This ratio measures the ability of the firm to meet its long-term liabilities It indicates  the funds provided by long term lenders in comparison to the funds provided by…

SOLUTION (i) Debt-Equity Ratio; (ii) Proprietary Ratio.

SOLUTION Solvency of business refers to the ability of the business to pay its long-term liabilities.

SOLUTION Quick ratio and acid test ratio.

SOLUTION Ideal Quick Ratio is 1: 1.

SOLUTION ‘Liquid Assets’ means those assets which will yield cash very shortly. Current assets except inventory and prepaid expenses are included in liquid assets.

SOLUTION It is a more rigorous test of liquidity than the current ratio. It is calculated by dividing liquid assets by current liabilities. Liquid Ratio = Liquid Assets / Current…

SOLUTION An ideal current ratio is 2: 1.

SOLUTION Current liabilities refer to those liabilities which are to be paid in near future (normally within one year).