The current ratio is a measure of a company's liquidity, calculated as current assets divided by current liabilities. Since the current ratio is calculated using current assets and liabilities, which are not affected by exchange rate changes, it would remain unchanged when applying any of the three methods (current rate, temporal, or conversion).

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Current Ratio

Question 36

Multiple Choice

Current ratio:

A) would be unchanged after applying the current rate method.
B) would be unchanged after applying the temporal method.
C) would be unchanged after applying the conversion method.
D) would be higher after applying the temporal method.

Correct Answer: