Irma's current ratio is 2.5. This means that
A) for every dollar of current assets, Irma has $2.50 in current liabilities.
B) for every dollar of current liabilities, Irma has $2.50 in current assets.
C) Irma has enough cash to pay her debts for the next 2.5 years.
D) Irma can borrow 2.5 times her annual sales.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. Therefore, a current ratio of 2.5 means that for every dollar of current liabilities, Irma has $2.50 in current assets.

Irma's Current Ratio Is 2.5. This Means That