The ________ is a measure of a company's ability to pay its current liabilities from cash and cash equivalents.
A) cash conversion cycle
B) cash ratio
C) gross profit
D) debt equity ratio

Question

Quizplus · Accepted Answer

The cash ratio is a liquidity ratio that measures a company's ability to pay off its current liabilities with its cash and cash equivalents. It is calculated by dividing a company's cash and cash equivalents by its current liabilities. The higher the cash ratio, the better the company's ability to pay off its current debts. A cash ratio of 1 or higher is typically considered a good benchmark. The other options are unrelated to measuring a company's ability to pay current liabilities with cash and cash equivalents.

The ________ Is a Measure of a Company's Ability to Pay