Which of the following measures a company's ability to pay current liabilities with current assets?
A) Net income
B) Debt ratio
C) Current ratio
D) Total assets

Question

Quizplus · Accepted Answer

The current ratio measures a company's ability to pay its current liabilities with its current assets. It is calculated as current assets divided by current liabilities. A ratio of 1 or greater indicates that a company has enough current assets to cover its current liabilities. A ratio of less than 1 indicates that a company may have difficulty paying its current liabilities as they come due. Net income measures profitability, the debt ratio measures the amount of debt a company has in relation to its assets, and total assets is the sum of all assets owned by a company.

Which of the Following Measures a Company's Ability to Pay