The current ratio:
A) Analyzes long-term ﬁnancial viability.
B) Will normally have a lower value than the quick ratio.
C) Is a measure of short-term liquidity.
D) Considers all debt obligations of a ﬁrm.
E) Indicates the turnover rate of a ﬁrm's accounts receivable.

Question

Quizplus · Accepted Answer

The current ratio measures a firm's ability to pay off its short-term liabilities with its current assets. It is a measure of short-term liquidity, which means a company's ability to meet its short-term financial obligations. Option A is incorrect because long-term viability is not analyzed with the current ratio. Option B is incorrect because it can be equal to or higher than the quick ratio. Option D is incorrect because the current ratio only considers short-term liabilities. Option E is incorrect because the turnover rate of accounts receivable is measured by the accounts receivable turnover ratio.

The Current Ratio