Excursion Corp.increased its dollar amount of working capital over the past several years.To further evaluate the company's short-run liquidity,which one of the following measures should be used?
A)The current ratio
B)An analysis of the company's long-term debt
C)An analysis of the return on stockholders' equity
D)An analysis of retained earnings

Question

Quizplus · Accepted Answer

The current ratio is the best measure of short-run liquidity as it compares current assets to current liabilities, indicating whether the company can pay its short-term obligations. An increase in working capital will likely increase the current assets, leading to a higher current ratio, which shows that the company has more liquidity. Options B, C, and D are long-term financial metrics that do not specifically relate to short-term liquidity.