1) It measures the capability of an entity to pay its short-term obligations. a) Solvency Ratios b) Liquidity Ratios c) Measurement Levels 2) It is a more strict variation of the current ratio formula. It removes Inventory and Prepaid Expenses from the numerator. a) Current Ratio b) Acid Test Ratio c) Working Capital 3) A good liquidity position can attract lenders, while a bad one may deter potential creditors. a) True b) False 4) One of the primary reasons why stockholders invest in a certain company is the chance to earn profits. a) Liquidity b) Solvency c) Profitability 5) How many profitability ratios can be used? a) 2 b) 4 c) 5 6) What are the two sub topics of Return on Investment Ratios? a) Return on Assets and Return on Equity b) Return on Assets and Return on Liability c) Return on Liability and Return on Equity 7) It measures the capability of an entity to pay long term obligations as they fall due. a) Liquidity Ratios b) Profitability Ratios c) Solvency Ratios 8) This is the proportion between total liabilities of the company with its total assets. a) Debt to Equity Ratio b) Debt to Total Assets Ratio c) Accounts Receivable Turnover Ratio 9) This is the long-term counterpart of liquidity. a) Profitability b) Solvency c) Stability

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