The current ratio
A)Measures the effect of operating income on profit.
B)Is used to measure a company's profitability.
C)Is used to measure the relationship between assets and long-term debt.
D)Only relates to noncurrent liabilities.
E)Is used to evaluate a company's ability to pay its short-term obligations.

Question

Quizplus · Accepted Answer

The current ratio is used to evaluate a company's ability to pay its short-term obligations. It measures the relationship between a company's current assets and current liabilities. A higher current ratio indicates that the company has a greater ability to pay its short-term debts.

The Current Ratio