Which of the following financial ratios is the correct formula for the current ratio?
A) Current assets-inventory/current liabilities
B) Current assets/current liabilities
C) Sales/average inventory
D) Current assets/total liabilities

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. This gives an indication of a company's ability to pay off its short-term debts using its current assets. Option A is the formula for the quick ratio, option C is the formula for inventory turnover ratio, and option D is the formula for the debt-to-equity ratio.

Which of the Following Financial Ratios Is the Correct Formula