The current ratio measures ________.
A) a company's ability to sell its long-term assets
B) a company's ability to pay current liabilities from its total assets
C) a company's ability to pay current liabilities from current assets
D) a company's profitability during a particular period

Question

Quizplus · Accepted Answer

The current ratio is a liquidity ratio that measures a company's ability to pay off its current liabilities using its current assets. It is calculated by dividing current assets by current liabilities. A higher current ratio indicates that a company has more current assets relative to its current liabilities, which means it is better positioned to meet its short-term obligations. Option A, B, and D are incorrect because the current ratio does not measure a company's ability to sell its long-term assets or its profitability during a particular period.

The Current Ratio Measures ________