The current ratio is calculated by:
A) Dividing current assets by total assets.
B) Dividing current assets by total liabilities.
C) Dividing current assets by shareholders' equity.
D) Dividing current assets by current liabilities.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. This ratio is important because it measures a company's ability to pay off its short-term debt obligations with its current assets. A higher current ratio indicates a stronger ability to meet short-term obligations.

The Current Ratio Is Calculated By