The current ratio
A) Is used to measure a company's profitability
B) Is used to measure the relationship between assets and long-term debt
C) Measures the effect of operating income on profit
D) Is used to evaluate a company's ability to pay its short-term obligations
E) Only relates to non-current liabilities

Question

Quizplus · Accepted Answer

The current ratio measures a company's ability to pay its short-term obligations or debts. It is calculated by dividing a company's current assets by its current liabilities. A high current ratio indicates that a company is likely able to meet its short-term debt obligations.

The Current Ratio