121. Hackett Company's current ratio is higher than the average for its industry, while its quick ratio is below the industry average. One possible interpretation for these results is that Hackett carries more inventory than most companies in its industry.
122. The quick ratio although similar to the current ratio is more conservative.
123. Liquidity ratios are used to analyze the long-term debt-paying ability and the composition of the financing structure of the firm.
124. The debt to equity ratio can be used to asses a firm's solvency.
125. In terms of solvency, the smaller the number of times interest is earned, the better.
126. When debt is used to finance purchase of assets, the term or time span of the debt should be similar to the lifespan of the assets.
127. Profitability ratios attempt to assess the company's ability to generate earnings.
128. The most frequently quoted measure of earnings performance is the stockholders' equity ratio.
129. A limitation of financial statement analysis stems from the discretion of management to choose accounting procedures that cast the best light on the firm's performance.