The current ratio fails to accurately reflect
A)the ability of a company to pay its current debts as they come due.
B)amounts that will come due within the next accounting period.
C)amounts due within the next operating cycle as of the end of the accounting period.
D)cash flows anticipated in future accounting periods.

Question

Quizplus · Accepted Answer

The current ratio only reflects a company's ability to pay its current debts with current assets, and does not take into account any cash flows anticipated in future accounting periods. Therefore, the correct answer is D. Choices A, B, and C are all accurate reflections of what the current ratio measures.

The Current Ratio Fails to Accurately Reflect