The current ratio:
A) Helps to assess a company's ability to pay its debts in the near future.
B) Reveals problems in a business if it is less than 1.
C) Is current assets divided by current liabilities and helps to assess a company's ability to pay its debts in the near future.
D) Is current assets divided by current liabilities.
E) All of these answers are correct.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities, helping to assess a company's ability to pay its short-term debts. A ratio less than 1 can indicate potential liquidity problems.

The Current Ratio