A liquidity ratio that indicates the extent to which short-term assets can decline and still be adequate to pay short-term liabilities is referred to as the
A)current ratio.
B)return on investment (ROI).
C)debt-equity ratio.
D)leverage ratio.
E)profitability ratio.

Question

Quizplus · Accepted Answer

The liquidity ratio that measures the ability of a company to pay off its short-term liabilities using its short-term assets is known as the current ratio. It calculates the proportion of current assets to current liabilities, and a higher ratio indicates that a company can meet its short-term obligations. Therefore, option A is the correct answer. Option B, C, D, and E are not related to measuring the short-term liquidity of a company.

A Liquidity Ratio That Indicates the Extent to Which Short-Term