Which of the following ratios measures short-term solvency?
A) Current ratio
B) Creditors' equity to total assets
C) Return on investment
D) Total asset turnover

Question

Quizplus · Accepted Answer

The current ratio measures a company's ability to meet its short-term obligations with its current assets. This ratio compares a company's current assets to its current liabilities, indicating whether the company has enough current assets to cover its current liabilities. A high current ratio indicates a company is likely to have no difficulty in meeting its short-term obligations.

Which of the Following Ratios Measures Short-Term Solvency