CH 5 Solvency Ratios
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Current Assests / Current Liabilities
Cash + Market Securities + A/R / Current liabilities
- Similar to the current ratio, this ratio
- provides a more stringent test of a company’s solvency.
- Net income + tax expenses + interest expence /
- Interest expense
Accounts Payable Turnover
Cost of goods sold / Average accounts payable
- This ratio measures the extent to which
- accounts payable is used as a form of financing.
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