The current ratio:
A) Is used to help assess a company's ability to pay its debts in the near future.
B) Is used to measure a company's profitability.
C) Measures the effect of operating income on profit.
D) Is used to measure the relation between assets and long-term debt.
E) Is calculated by dividing current assets by equity.

Question

Quizplus · Accepted Answer

The current ratio is a financial ratio used to assess a company's ability to pay its debts in the near future. It is calculated by dividing current assets by current liabilities, and a ratio of 2:1 or higher is considered healthy.

The Current Ratio