The higher the _____, the more liquid the company is and the more easily its assets can be converted to cash to pay off short-term obligations.
A) return on investment
B) inventory turnover
C) current ratio
D) profit margin
E) operating cash inflows

Question

The higher the _____, the more liquid the company is and the more easily its assets can be converted to cash to pay off short-term obligations.
A) return on investment
B) inventory turnover
C) current ratio
D) profit margin
E) operating  cash inflows

Quizplus · Accepted Answer

The current ratio, calculated as current assets divided by current liabilities, measures a company's ability to pay off its short-term liabilities with its short-term assets. A higher current ratio indicates greater liquidity, meaning the company can more easily convert assets to cash to cover short-term obligations.

The Higher the _____, the More Liquid the Company Is