The current ratio measures a company's ability to meet current obligations out of current assets.

Question

Quizplus · Accepted Answer

The statement is correct. The current ratio is calculated by dividing current assets by current liabilities, and it is used to assess a company's short-term liquidity, i.e., its ability to pay its bills and other obligations that are due within a year. A higher current ratio indicates a better ability to meet short-term obligations, while a lower current ratio may suggest that a company is struggling to do so.

The Current Ratio Measures a Company's Ability to Meet Current