The current ratio divides total current assets by total current liabilities and is an example of which type of ratio?
A) solvency ratio
B) profitability ratio
C) liquidity ratio
D) activity ratio

Question

Quizplus · Accepted Answer

The current ratio is a liquidity ratio, which indicates a company's ability to pay its current liabilities with its current assets. A ratio value of more than 1 indicates that a company can pay its short-term obligations with the assets it has on hand.

The Current Ratio Divides Total Current Assets by Total Current