If Thabo's business's current ratio _____, its liquidity _____.
A)increases; increases
B)increases; decreases
C)decreases; increases
D)increases; remains the same

Question

Quizplus · Accepted Answer

The current ratio measures a company's ability to pay its short-term debt obligations. It is calculated by dividing current assets by current liabilities. If Thabo's business's current ratio increases, it means that its current assets have increased relative to its current liabilities. This indicates that the business has improved its ability to meet its short-term debt obligations, which increases its liquidity.

If Thabo's Business's Current Ratio _____, Its Liquidity _____

If Thabo's Business's Current Ratio _, Its Liquidity _