LO3-8 EXAM 2024 WITH 100% ACCURATE SOLUTIONS, Exams of Nursing

Download LO3-8 EXAM 2024 WITH 100% ACCURATE SOLUTIONS and more Exams Nursing in PDF only on Docsity! LO3-8 EXAM 2024 WITH 100% ACCURATE SOLUTIONS Identify and calculate the common liquidity and solvency ratios used to assess risk - ANSWER ☑☑LO3-8 Most often refers to the ability of a company to convert its assets to cash to pay its current obligations - ANSWER ☑☑Liquidity By examining a company's liquidity, we can obtain a general idea of the firm's ability to pay it's _____- ______ ______ as they come due - ANSWER ☑☑Short-term debts What are the two most common ratios for measuring liquidity? - ANSWER ☑☑1. Current Ratio 2. Acid-test (or quick ratio) differences between current assets and current liabilities - ANSWER ☑☑Working Capital Working capital offers some indication of an ability to pay _______ _______ - ANSWER ☑☑Current Debts Measure of a company's liquidity computed as current assets divided by current liabilities - ANSWER ☑☑Current Ratio Current Ratio Formula - ANSWER ☑☑Current Assets / Current Liabilities The current ratio on its own does not give a clear picture of whether or not there is enough ________ available to pay current debts, since it uses current assets as the calculation - ANSWER ☑☑Cash measure of a company's liquidity computed as current assets, excluding inventories and prepaid items, divided by current liabilities - ANSWER ☑☑Acid-test ratio Acid-test ratio (or quick ratio) formula - ANSWER ☑☑Quick Assets / Current Liabilities Quick Assets calculation for the acid-test ratio's numerator - ANSWER ☑☑Quick assets = Total Current assets - inventories - prepaid items - restricted cash Or Quick assets = Cash (unrestricted) + short-term investments + accounts receivable By removing assets that are not quickly convertible into cash, the acid-test ratio provides a more rigorous indication of liquidity than does the ________ ratio - ANSWER ☑☑Current Ratio calculations on their own do not provide enough information to judge liquidity without some point of __________ - ANSWER ☑☑Comparison Liquidity ratios should be assessed in the context of both ______ and _____ of managing assets - ANSWER ☑☑profitability; efficiency a company's ability to pay its long-term debts - ANSWER ☑☑Long-term solvency Who is most interested in a company's long-term solvency? - ANSWER ☑☑Investors and creditors What are the two most common solvency ratios? - ANSWER ☑☑1. Debt to Equity Ratio 2. Times Interest Earned Ratio compares resources provided by creditors with resources provided by owners; computed as total liabilities divided by shareholders' equity - ANSWER ☑☑Debt to Equity Ratio Debt to Equity Formula - ANSWER ☑☑Total Liabilities / Shareholders' Equity the mixture of liabilities and shareholders' equity in a company - ANSWER ☑☑Capital Structure