For which of the following is the current ratio most useful?
A)In evaluating a company's profitability
B)In evaluating a company's solvency
C)In evaluating a company's return on assets
D)In evaluating a company's liquidity

Question

Quizplus · Accepted Answer

The current ratio is most useful in evaluating a company's liquidity, which measures its ability to meet short-term obligations with its current assets. The formula for the current ratio is current assets divided by current liabilities. A higher current ratio indicates a company has more current assets relative to its current liabilities, and therefore is more able to pay off its debts and fulfill its obligations in the near future.

For Which of the Following Is the Current Ratio Most