Compare and contrast different types of financial ratios
What will be an ideal response?
Answer: Organizations can analyze how well a company is conducting its ongoing operations by computing profitability ratios. They show the state of the company's financial performance or how well it's generating profits.
Liquidity ratios measure a firm's ability to pay its short-term obligations. As you might expect, lenders and creditors are keenly interested in liquidity measures. A company's working capital (current assets minus current liabilities) is an indicator of liquidity because it represents current assets remaining after the payment of all current liabilities.
Activity ratios analyze how well a company is managing and making use of its assets.
A company's ability to pay its long-term debts is reflected in its leverage ratios, also known as debt ratios. Both lenders and investors use these ratios to judge a company's risk and growth potential.
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Indicate whether the statement is true or false
The form of business ownership that gives the owner total control of how the business is run is
the A) limited partnership. B) corporation. C) partnership. D) sole proprietorship. E) Subchapter S corporation.