The relationship between current liabilities and current assets is
A) useful in determining income.
B) useful in evaluating a company's short-term debt paying ability.
C) called the matching principle.
D) useful in determining the amount of a company's long-term debt.

Question

Quizplus · Accepted Answer

The relationship between current liabilities and current assets is crucial for evaluating a company's short-term debt paying ability, as it indicates whether the company has enough assets to cover its short-term obligations. This is often assessed using the current ratio (current assets divided by current liabilities).

The Relationship Between Current Liabilities and Current Assets Is