If a firm's current ratio _____, its liquidity _____.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) increases; remains the same

Question

Quizplus · Accepted Answer

Current ratio is a liquidity measure that indicates the ability of a firm to pay its current obligations using its current assets. If the current ratio increases, it means that the firm has more current assets relative to its current liabilities, which signals an improvement in its ability to meet its short-term obligations, and thus an increase in its liquidity.

If a Firm's Current Ratio _____, Its Liquidity _____

If a Firm's Current Ratio _, Its Liquidity _