The current ratio:
A) Is current assets divided by current liabilities.
B) Helps to assess a company's ability to pay its debts in the near future.
C) Suggests there may be problems in a business if it is less than 1.
D) Is a measure of a company's liquidity.
E) All of these answers are correct.

Question

Quizplus · Accepted Answer

All of the given choices are correct. The current ratio is calculated by dividing current assets by current liabilities, and it helps to assess a company's ability to pay its debts in the near future. A current ratio less than 1 may suggest there are problems in a business as it may not be able to meet its short-term obligations. The current ratio is commonly used as a measure of a company's liquidity.

The Current Ratio