The current ratio is
A)calculated by dividing current liabilities by current assets.
B)used to evaluate a company's liquidity and short-term debt paying ability.
C)used to evaluate a company's solvency and long-term debt paying ability.
D)calculated by subtracting current liabilities from current assets.

Question

Quizplus · Accepted Answer

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year. It is calculated by dividing current assets by current liabilities, not subtracting liabilities from assets or evaluating long-term debt paying ability.

The Current Ratio Is