The current ratio:
A)Is used to measure a company's profitability.
B)Is used to measure the relation between assets and long-term debt.
C)Measures the effect of operating income on profit.
D)Is used to help evaluate a company's ability to pay its short-term obligations.
E)Is calculated by dividing current assets by equity.

Question

Quizplus · Accepted Answer

The current ratio measures a company's ability to pay its short-term obligations. It is calculated by dividing current assets by current liabilities. A higher current ratio indicates that a company is more capable of paying off its short-term debts.

The Current Ratio