Asked by Suzette Miranda on May 30, 2024
Verified
What is the current ratio?
A) 2.3:1
B) 2.0:1
C) 0.6:1
D) 0.4:1
Current Ratio
A financial ratio that evaluates a firm's capacity to meet its short-term liabilities, which are due within a year.
- Master the basics of financial ratios and the steps for their calculation.
- Grasp the importance of the current ratio and working capital measurement in assessing a company's liquidity.
Verified Answer
ZK
Zybrea KnightJun 04, 2024
Final Answer :
A
Explanation :
The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year. It is calculated by dividing current assets by current liabilities. A current ratio of 2.3:1 means the company has 2.3 times more current assets than current liabilities, indicating good short-term financial health.
Learning Objectives
- Master the basics of financial ratios and the steps for their calculation.
- Grasp the importance of the current ratio and working capital measurement in assessing a company's liquidity.