Which of the following statements is TRUE?
A)The current ratio is current assets divided by current liabilities.
B)Total asset turnover is net income divided by total assets.
C)The cash coverage ratio equals cash divided by current liabilities.
D)The quick ratio equals current assets - current liabilities divided by current liabilities.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. B is incorrect as total asset turnover is calculated by dividing net sales by total assets. C is incorrect as the cash coverage ratio is calculated by dividing cash plus cash equivalents by current liabilities. D is incorrect as the quick ratio is calculated by subtracting inventories from current assets and then dividing the result by current liabilities.

Which of the Following Statements Is TRUE