A current ratio of 0.9 means:
A) the firm has a debt ratio of 90%.
B) the firm has $0.90 of current assets for every $1.00 of current liabilities.
C) the firm has $0.90 of current liabilities for every $1.00 of current assets.
D) the firm has $0.90 of fixed assets for every $1.00 of current assets.

Question

Quizplus · Accepted Answer

The current ratio is calculated as current assets divided by current liabilities. A current ratio of 0.9 indicates that the firm has $0.90 of current assets for every $1.00 of current liabilities, showing a measure of liquidity.

A Current Ratio of 0.9 Means