The current ratio can be used to evaluate a company's ability to pay liabilities in the short term,and in general,a lower ratio means better ability to pay.

Question

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A higher current ratio (current assets divided by current liabilities) indicates better ability to pay liabilities in the short-term, as the company has sufficient current assets to cover its current liabilities. A lower current ratio may suggest the company may struggle to pay its short-term debts.

The Current Ratio Can Be Used to Evaluate a Company's