Which of the following statements about current liabilities is true?
A) The current ratio is defined as current assets divided by current liabilities.
B) The current liability section never contains any portion of long-term liabilities.
C) Current liabilities are listed in order of decreasing amounts in the current liability section of the balance sheet.
D) The amount of current liabilities has little implication for a company's liquidity.

Question

Quizplus · Accepted Answer

The current ratio is a liquidity ratio that measures a company's ability to cover its short-term obligations with its short-term assets, and it is calculated by dividing current assets by current liabilities.

Which of the Following Statements About Current Liabilities Is True