Which of the following ratios is a measure of a company's ability to pay liabilities with current assets?
A) The inventory turnover ratio
B) The day's sales in receivables
C) The current ratio
D) The price/earnings ratio

Question

Quizplus · Accepted Answer

The current ratio measures a company's ability to pay off its liabilities with current assets, which includes cash, accounts receivable, and inventory. A higher current ratio indicates that a company has more assets available to pay off its debts. The inventory turnover ratio measures how quickly a company sells its inventory, the day's sales in receivables measures how quickly a company collects on its outstanding accounts receivable, and the price/earnings ratio measures a company's stock price relative to its earnings per share.

Which of the Following Ratios Is a Measure of a Company's