What does the current ratio inform you about a company?
A) The extent of slow-moving inventories.
B) The efficient use of assets.
C) The company's liquidity.
D) The company's profitability.

Question

Quizplus · Accepted Answer

The current ratio is a measure of a company's liquidity, which is its ability to pay off short-term debt obligations. It is calculated by dividing the company's current assets by its current liabilities. A high current ratio indicates that a company has enough short-term assets to cover its short-term liabilities, meaning it has good liquidity. A low current ratio may suggest that a company may have difficulty paying off its short-term debts. Therefore, the current ratio informs about the company's liquidity.

What Does the Current Ratio Inform You About a Company