How is the current ratio computed?
A)Current assets divided by current liabilities.
B)Current assets divided by total assets.
C)Current liabilities divided by total assets.
D)Current liabilities divided by current assets.

Question

Quizplus · Accepted Answer

The current ratio is computed by dividing current assets by current liabilities. This ratio indicates a company's ability to pay off its short-term obligations using its current assets. A higher current ratio is generally considered better, as it suggests that the company has a greater ability to meet its short-term financial obligations.

How Is the Current Ratio Computed