If a firm has a current ratio of 2.5, it means that for every $2.50 in ______ it has $1.00 in ______.
A) total assets; total liabilities
B) total assets; current liabilities
C) current assets; current liabilities
D) current assets; total liabilities

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. Therefore, a current ratio of 2.5 indicates that for every $1 in current liabilities, the firm has $2.50 in current assets. Therefore, the best choice is C, current assets; current liabilities.

If a Firm Has a Current Ratio of 2