Question: 1. Explain why ratios that compare an income statement account with a balance sheet account should express the balance sheet account as an average of the beginning and ending balances.
2. What is the difference between liquidity and solvency?
3. Which risk ratios best answer each of the following financial questions?
a. How quickly is a company able to collect its receivables?
b. How quickly is a company able to sell its inventory?
c. Is the company able to make interest payments as they become due?