The current ratio can help users of financial statements assess a business entity's liquidity.

Question

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The current ratio is a liquidity ratio that measures a company's ability to pay its short-term obligations using its current assets. A higher current ratio indicates a stronger liquidity position, while a lower current ratio may suggest difficulty in meeting short-term obligations. Thus, the current ratio is a useful tool for assessing a company's liquidity, which is important for creditors, investors, and other stakeholders in evaluating the company's financial health and policy.

The Current Ratio Can Help Users of Financial Statements Assess