Asked by Maryana Bilska on Jul 08, 2024
Verified
An advantage of the current ratio is that it considers the makeup of the current assets.
Current Ratio
A liquidity ratio that measures a company's ability to pay short-term obligations with its current assets over its current liabilities.
Current Assets
Current assets are assets that a company expects to convert into cash, sell, or consume within one year or within its operating cycle if longer than a year.
- Discover and explain the significance of multiple financial ratios in assessing the financial health of a corporation.
- Master the concept of working capital and its impact on short-term financial appraisal.
Verified Answer
HH
Helene HaegerstrandJul 10, 2024
Final Answer :
False
Explanation :
The current ratio measures a company's ability to pay short-term obligations or those due within one year, by comparing current assets to current liabilities. It does not consider the makeup or quality of the current assets, such as how liquid or easily convertible to cash those assets are.
Learning Objectives
- Discover and explain the significance of multiple financial ratios in assessing the financial health of a corporation.
- Master the concept of working capital and its impact on short-term financial appraisal.
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