The current ratio:
A) Is used to measure a company's profitability.
B) Is used to measure the relation between assets and long-term debt.
C) Measures the effect of operating income on profit.
D) Is used to help evaluate a company's ability to pay its debts in the near future.
E) Is calculated by dividing current assets by equity.

Question

Quizplus · Accepted Answer

The current ratio is used to evaluate a company's ability to pay its debts in the near future. It is calculated by dividing current assets by current liabilities.

The Current Ratio