Irma's current ratio is 2.5.This means that:
A)for every dollar of current assets,Irma has $2.50 in current liabilities.
B)for every dollar of current liabilities,Irma has $2.50 in current assets.
C)Irma has enough cash to pay her cebts for the next 2.5 years.
D)Irma can borrow 2.5 times her annual sales.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. Therefore, for every dollar of current liabilities, Irma has $2.5 in current assets. Option A is the opposite of the correct explanation, option C is unrelated to current ratio, and option D is not relevant to this concept.

Irma's Current Ratio Is 2.5.This Means That