The relationship between current assets and current liabilities is
A)useful in determining income.
B)useful in evaluating a company's liquidity.
C)called the matching principle.
D)useful in determining the amount of a company's long-term debt.

Question

Quizplus · Accepted Answer

The relationship between current assets and current liabilities is useful in evaluating a company's liquidity. Liquidity refers to a company's ability to meet its short-term obligations. Current assets are assets that can be easily converted into cash, while current liabilities are obligations that are due within one year. By comparing current assets to current liabilities, analysts can assess a company's ability to pay its bills and meet its other short-term financial obligations.

The Relationship Between Current Assets and Current Liabilities Is