The current ratio is
A) used to evaluate a company's liquidity and short-term debt-paying ability
B) a solvency measure that indicates the margin of safety for bondholders
C) calculated by dividing current liabilities by current assets
D) calculated by subtracting current liabilities from current assets

Question

Quizplus · Accepted Answer

The current ratio is a liquidity ratio that evaluates a company's short-term debt-paying ability by dividing its current assets by its current liabilities. This gives an indication of how easily a company can meet its short-term financial obligations.

The Current Ratio Is