Efficiency ratios

CFA Level I FRA
#1

Which of the following classifications of ratios is least likely to be used to evaluate a firm’s operating efficiency?

  1. Profitability ratios
  2. Solvency ratios
  3. Activity ratio

According to this question profitabilty ratios are efficiency ratios since the ans is 2. Need clarification

#2

Efficiency is:

  • Generating sales from assets (activity ratios)
  • Generating profits from sales (profitability ratios)
#3

well have to remember what Solvency Ratio means. it deals with long term liquitidy. so right there you should know that’s your answer,

#4

Be careful not to confuse terms.

Liquidity is, by definition, short-term : the ability to pay your short-term obligations.

Solvency is, by definition, long-term : the ability to pay your long-term obligations.

There is no such thing as _ long-term liquidity _.