The current ratio is calculated as
A)current assets divided by current liabilities.
B)current assets divided by total assets.
C)current liabilities divided by current assets.
D)current liabilities divided by total liabilities.

Question

Quizplus · Accepted Answer

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations. It is calculated by dividing current assets (cash and other assets that can be converted into cash within 12 months) by current liabilities (obligations due within 12 months). Therefore, option A (current assets divided by current liabilities) is the correct calculation for the current ratio.

The Current Ratio Is Calculated as