Definitions

Question 1

Financial Stability Definition

Answer 1

The financial stability ratios gives an indication of the short-term liquidity and the long-term solvency of the enterprise

Question 2

Current Ratio Definition and Strategies

Answer 2

Indicates the ability of a enterprise to meet its short term financial obligations
Strategies: Increase current assets decrease current liabilities

Question 3

Quick Ratio Definition and Strategies

Answer 3

Indicates the ability to meet its financial obligations
Strategies:
Increase current assets
Decrease current liabilities

Question 4

Equity Ratio Definition and Strategies

Answer 4

Indicates the extent to which the owner has financed the business’s assets as opposed to using alternative source of finance- borrowings.
Strategies:
Decrease debt through repayment
Minimize the need to hold large assets
Minimize the need to borrow beyond the 50:50 balance of debt/equity.

Question 5

Debt Ratio and Strategies

Answer 5

Indicates the way in which the business is financed and the extend of the business’s borrowings in relation to its assets.
Strategies:
Decrease debt through repayment
Minimize the need to hold large assets
Minimize the need to borrow beyond the 50:50 balance of debt/equity.