Which of the following statements is true about a current ratio of 1.5?
A) There is $1.50 of current assets available to pay every dollar of current debt.
B) There is $1.50 of owner's equity available to pay every dollar of total debt.
C) The current liabilities are to be repaid at 1.5 times their value.
D) The current liabilities are 1.5 times of current assets.

Question

Quizplus · Accepted Answer

A current ratio of 1.5 means that there is $1.50 of current assets available to pay every dollar of current debt. This indicates that the company has sufficient current assets to meet its current debt obligations. Option B is incorrect as it refers to owner's equity, which is not related to the current ratio. Option C and D are also incorrect as they do not accurately reflect the meaning of the current ratio.

Which of the Following Statements Is True About a Current