A company increased its dollar amount of working capital over the past several years. Which one of the following measures should be used to further evaluate the company's short-run liquidity?
A)The Asset Ratio
B)An analysis of the company's long-term debt
C)An analysis of the return on stockholders' equity
D)The Current Ratio

Question

Quizplus · Accepted Answer

The Current Ratio is the best choice to evaluate the company's short-run liquidity as it measures the company's ability to pay its short-term obligations using its current assets. It takes into account the company's current assets (such as cash, inventory, and accounts receivable) and current liabilities (such as accounts payable and current portion of long-term debt) to calculate the ratio. If the current ratio is high, it indicates that the company has enough current assets to pay its current liabilities and is thus in a good liquidity position.

A Company Increased Its Dollar Amount of Working Capital Over