Alex wants to make sure he has enough liquid assets to pay his current bills. To do this, he should calculate his firm's
A) debt ratio.
B) statement of cash flows.
C) current ratio.
D) asset turnover ratio.

Question

Quizplus · Accepted Answer

The current ratio is a liquidity ratio that measures a company's ability to pay its short-term obligations with its current assets. It's calculated by dividing current assets by current liabilities. This will give Alex a clear understanding of how much in liquid assets he has available to pay his bills. A higher current ratio indicates that a company has more current assets to pay its current liabilities, which is a positive sign.

Alex Wants to Make Sure He Has Enough Liquid Assets