Which financial ratio relates most closely to a company's ability to pay its short-term debts?
A)Receivables turnover
B)Debt to equity ratio
C)Return on assets
D)Current ratio

Question

Quizplus · Accepted Answer

The current ratio measures a company's ability to pay its short-term debts by comparing its current assets to its current liabilities. A higher current ratio indicates a stronger ability to pay off short-term debts. Therefore, this ratio is most closely related to a company's ability to pay its short-term debts.

Which Financial Ratio Relates Most Closely to a Company's Ability