Last year,a firm had a current ratio of 2.0 and an acid-test ratio of 1.0.This year the firm's current ratio is 2.5 and its acid-test ratio is 1.5.This firm's _____ has _____.
A)profitability;improved
B)profitability;deteriorated
C)liquidity;improved
D)liquidity;deteriorated

Question

Quizplus · Accepted Answer

The current ratio and acid-test ratio are both measures of a company's liquidity, or ability to meet its short-term obligations. An increase in both ratios indicates improved liquidity, as the company has more assets available to cover its liabilities. Profitability is not directly related to these ratios.

Last Year,a Firm Had a Current Ratio of 2