The conventional measure of a firm's liquidity is the
A) debt ratio
B) cash flow statement
C) current ratio
D) asset turnover ratio

Question

Quizplus · Accepted Answer

The current ratio is a measure of a company's ability to pay its short-term obligations. It is calculated by dividing current assets by current liabilities. A higher current ratio indicates that a company has more current assets than current liabilities, and is therefore more capable of paying off its short-term debts. This is a good measure of liquidity, as it shows how quickly a company can convert its assets to cash to pay off its debts.

The Conventional Measure of a Firm's Liquidity Is the