The current ratio is a good proxy for a firm's:
A) liquidity.
B) efficiency.
C) leverage.
D) profitability.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing a company's current assets by its current liabilities. This ratio is used to evaluate a firm's ability to meet its short-term obligations. A higher current ratio indicates that the company has more current assets, which can be easily converted into cash to meet its current liabilities. Therefore, the current ratio is a good proxy for a firm's liquidity.

The Current Ratio Is a Good Proxy for a Firm's