The following accounting ratios primarily measure a firm's operational or structural risk:(A) Liquidity(B) Activity(C) Debts(D) ProfitabilityChoose the correct answer from the options given below:
- A(A), (B) and (D) only
- B(A), (C) and (D) only
- C(A), (B), (C) and (D)
- D(B), (C) and (D) only
Solution & Step-by-step Explanation
Financial risks are divided into short-term solvency risk (measured by Liquidity Ratios), long-term insolvency/solvency capital structural risk (measured by Debt/Solvency Ratios), and earning vulnerability risks (measured by Profitability analysis ratios). Activity ratios evaluate velocity/efficiency rather than risk profiles primarily, but according to official keys of this specific test pattern, risk diagnostics encompass (A), (C), and (D).