Which of the following statements about the current ratio is false?
A)it includes inventories
B)it is a measure of profitability
C)it is equal to current assets divided by current liabilities
D)it is affected by the accounting methods used by a company

Question

Quizplus · Accepted Answer

The current ratio is not a measure of profitability, it is a liquidity ratio that measures a company's ability to pay off its current liabilities with its current assets. A high current ratio indicates that a company has enough current assets to cover its current liabilities, while a low current ratio may indicate that a company may need to borrow or sell assets to meet its short-term obligations. The current ratio includes inventories, and it can be affected by the accounting methods used by a company.

Which of the Following Statements About the Current Ratio Is