Make the right combination of ratios that enables to find the short-term liquidity of a firm:A. Return on EquityB. Acid Test RatioC. Sacrificing RatioD. Inventory Turnover RatioE. Current RatioChoose the correct answer from the options given below:
- AB and E only
- BA and C only
- CA and E only
- DC and D only
Solution & Step-by-step Explanation
Short-term liquidity ratios assess an enterprise's ability to meet its current financial obligations. The key indicators of short-term liquidity are:Current Ratio (E)Acid Test Ratio / Quick Ratio (B)Return on Equity (A) is a profitability ratio.Sacrificing Ratio (C) belongs to partnership accounting.Inventory Turnover Ratio (D) is an efficiency/activity ratio.