Which of the following functional area ratios determines a company's ability to pay short-term debt?
A) return on investment
B) quick ratio
C) debt to equity
D) current ratio

Question

Quizplus · Accepted Answer

The current ratio measures a company's ability to pay short-term debt by comparing its current assets to its current liabilities. A higher current ratio indicates a better ability to pay off short-term debts, while a lower current ratio indicates a greater risk of defaulting on these debts. The other ratios listed (return on investment, quick ratio, and debt to equity) focus on different aspects of a company's financial health and do not specifically address short-term debt repayment ability.

Which of the Following Functional Area Ratios Determines a Company's