Olivia has recently reviewed a number of indicators of financial control. The ones that troubled her indicated that the company could have trouble meeting its short-term financial obligations. Which of the following was she concerned about?
A) profit and loss statement
B) profitability ratio
C) leverage ratio
D) current ratio
E) return on investment

Question

Quizplus · Accepted Answer

The current ratio measures a company's ability to pay off its short-term liabilities with its current assets. If the current ratio is low, it indicates that the company may not have enough cash or assets readily available to meet its short-term financial obligations. This is likely what Olivia was concerned about. The profit and loss statement, profitability ratio, leverage ratio, and return on investment do not specifically measure a company's ability to meet its short-term financial obligations.

Olivia Has Recently Reviewed a Number of Indicators of Financial