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    The ratios that refer to the ability of the firm to meet the short term obligations out of short term resources is called.
    Question

    The ratios that refer to the ability of the firm to meet the short term obligations out of short term resources is called.

    A.

    Activity ratio

    B.

    Liquidity ratio

    C.

    Profitability ratio

    D.

    Leverage ratio

    Correct option is B

    The correct answer is:

    (b) Liquidity ratio

    Liquidity ratios assess a firm's ability to meet short-term obligations using its short-term assets. Key examples include the Current Ratio (Current Assets / Current Liabilities) and Quick Ratio (Quick Assets / Current Liabilities). A higher liquidity ratio indicates better financial health and the ability to cover short-term debts without financial distress.​

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