The current ratio:
A)Is computed by dividing current assets by current liabilities.
B)Is computed by subtracting current liabilities from current assets.
C)Remains unchanged throughout the operating cycle.
D)Is a measure of short-term profitability.

Question

Quizplus · Accepted Answer

The current ratio is computed by dividing current assets by current liabilities. It is a measure of a company's ability to pay off its current liabilities with its current assets. A higher current ratio indicates that a company is more able to meet its short-term obligations.

The Current Ratio