Liquidity ratios measure:
a. how effectively a company is using its equity
b. how effectively a company is using it libilities
c. a company's ability to pay shareholder
d. a companys ability to pay off short-term debts
Liquidity ratios attempt to measure a company's ability to pay off its short-term debt obligations. This is done by comparing a company's most liquid assets (or, those that can be easily converted to cash), its short-term liabilities.
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