Calculate the _________________ to assess liquidity (an indicator of a company's ability to cover its current liabilities).

Question

Quizplus · Accepted Answer

The current ratio is the most appropriate measure to assess liquidity as it indicates the ability of a company to cover its short-term liabilities with its current assets. The formula for calculating the current ratio is: Current Assets / Current Liabilities. A higher current ratio indicates better liquidity. Option A (Debt ratio) measures the amount of debt the company has in relation to its assets and may not necessarily reflect its liquidity. Option C (Times interest earned ratio) measures a company's ability to cover its interest expenses with its operating income and Option D (Asset ratio) measures the total assets of a company in relation to its total liabilities, which is not a specific indicator of liquidity.

Calculate the _________________ to Assess Liquidity (An Indicator of a Company's