Which of the following statements does not properly describe the current ratio?
A)It measures the ability of a firm to pay its debts in the short-run.
B)It is current assets divided by current liabilities.
C)It is a measure of a firm's short-run liquidity.
D)It measures a firm's ability to pay its long-term debts as they mature.

Question

Quizplus · Accepted Answer

The current ratio is a measure of a firm's short-term liquidity, specifically its ability to pay its current debts with its current assets. It does not measure a firm's ability to pay its long-term debts as they mature.

Which of the Following Statements Does Not Properly Describe the Current