Practice question · Sort into groups
Liquidity, solvency, or profitability ratio?
Groups: Liquidity · Solvency · Profitability
- Debt-to-equity
- Return on equity
- Interest cover
- Return on assets
- Current ratio
- Quick ratio
Hints
- The three families concern short-term payment, long-term survival, and earnings.
- Anything comparing debt to equity concerns survival.
Show the answer
Liquidity: Quick ratio, Current ratio
Solvency: Debt-to-equity, Interest cover
Profitability: Return on equity, Return on assets
Why
Three families: can we pay today (liquidity), can we survive long-term (solvency), are we earning enough (profitability).
Practise Financial Statement Analysis
The app has 6 more questions on this lesson, and keeps your place in the course. Business I is free to start.
More questions on Financial Statement Analysis
- EBIT 450, interest expense 90. Estimate the interest cover ratio.
- Match each DuPont component to its formula.
- A firm's ROE rises from 12% to 20% while its ROA is unchanged. What has management actually done?
- A firm's ROE is 18% but its ROA is only 6%. The DuPont leverage multiplier must be:
- Which benchmarks make a ratio meaningful?
- A firm reports rising profit and an interest cover falling toward 1. What does that combination indicate?