The ratio that indicates the "liquidity" of a company is:
A) the current ratio.
B) debt to equity.
C) gross margin.
D) the average collection period.

Question

Quizplus · Accepted Answer

The current ratio measures a company's ability to pay its current liabilities with its current assets. A higher current ratio indicates that a company is more liquid, as it has more current assets to cover its current liabilities. Therefore, the current ratio is the best ratio to indicate the liquidity of a company.

The Ratio That Indicates the "Liquidity" of a Company Is