Asked by Raymond Pittman on May 06, 2024
Verified
The formula for the current ratio is
A) current assets multiplied by current liabilities
B) assets multiplied by liabilities
C) current assets divided by current liabilities
D) assets divided by liabilities
Current Ratio
A financial metric indicating a firm's capability to settle short-term debts due within a year, derived by dividing current assets by current liabilities.
Current Assets
Assets that are expected to be converted into cash, sold, or consumed within one year or the normal operating cycle, whichever is longer.
- Evaluate the current ratio of a business and appreciate its pertinence to short-term fiscal solvency.
Verified Answer
JK
Justin KobashigawaMay 08, 2024
Final Answer :
C
Explanation :
The current ratio is calculated by dividing current assets by current liabilities. This ratio indicates a company's ability to pay its short-term debt obligations using its current assets. Thus, the correct formula for the current ratio is current assets divided by current liabilities.
Learning Objectives
- Evaluate the current ratio of a business and appreciate its pertinence to short-term fiscal solvency.
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