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

Question

Quizplus · Accepted Answer

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

The Current Ratio