What does the current ratio measure?
A)Use of assets
B)Profitability
C)Investments
D)Liquidity

Question

Quizplus · Accepted Answer

The current ratio measures a company's liquidity, or its ability to pay its short-term debts using its current assets. A high current ratio indicates that a company has enough current assets (such as cash, accounts receivable, and inventory) to cover its current liabilities (such as accounts payable and short-term debt), which is seen as favorable by investors and creditors. Therefore, option D is the best choice.

What Does the Current Ratio Measure