Which of the following would be an appropriate interpretation of a current ratio of 1.76?
A) The company earned $1.76 for every dollar of assets.
B) The company has $1.76 of current assets for every dollar of current liabilities.
C) The company's debt is 176% of its capital structure.
D) The company has $1.76 of current assets for every dollar of total assets.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. A current ratio of 1.76 means that the company has $1.76 of current assets for every dollar of current liabilities, indicating that the company may be able to meet its current obligations using its current assets. The other options are incorrect interpretations of the current ratio.

Which of the Following Would Be an Appropriate Interpretation of a Current