Question

Which of the following ratios would be least useful in determining a company's ability to pay...

Which of the following ratios would be least useful in determining a company's ability to pay its expenses and liabilities?

Question 45 options:

Current ratio

Acid-test ratio

Price-earnings ratio

Times interest earned ratio
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Homework Answers

Answer #1

The correct option is Price Earnings Ratio.

The price earning ratio is least useful in determining a company's ability to pay its expenses and liabilities because price earning ratio is calculated to find out the ratio between the company's share prices and the earnings per share of the company.

This it has no relation in determining the company's ability to pay its expenses and liabilities.

The current ratio determines the short term solvency of the company and to check whether there are enough current assets to pay off all the current liabilities.

Acid test ratio also determines the short term solvency of the company.

Times interest earned ratio is used for determining that the company has enough funds to make its debts payment.

This only the price earning ratio is the least useful ratio.....

In case of any doubt please comment below.

Thank you. Please upvote it.......

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