Which of the following statements is true about the current asset ratio?

Question

Quizplus · Accepted Answer

The current asset ratio is calculated by dividing current assets by current liabilities. This ratio indicates a company's ability to pay off its short-term obligations with its current assets. An increase in the accounts receivable turnover ratio would not necessarily result in an increase in the current ratio, as it depends on how much the increase in turnover affects current assets compared to current liabilities. The current asset ratio is not an indicator of long term liquidity, as it only takes into account current assets and liabilities. The current asset ratio can be less than or greater than one, depending on the company's current asset and liability levels.

Which of the Following Statements Is True About the Current