In order to calculate the current ratio for your firm,you divide the total value of current assets by:
A)Earnings per share.
B)The total value of current liabilities.
C)The total owners' equity.
D)The total cost of goods sold.

Question

Quizplus · Accepted Answer

The current ratio is a financial ratio that measures a company's ability to pay its short-term obligations with its current assets. It is calculated by dividing the total value of current assets by the total value of current liabilities. Choice A is incorrect because earnings per share is a measure of profitability and not relevant to the current ratio. Choice C is incorrect because owners' equity represents long-term financing, not current assets or liabilities. Choice D is incorrect because the total cost of goods sold is an expense and not relevant to the current ratio.

In Order to Calculate the Current Ratio for Your Firm,you