Asked by ricardo caraballo on May 26, 2024
Verified
Current ratio
A) Assess the profitability of the assets
B) Assess how effectively assets are used
C) Indicate the ability to pay current liabilities
D) Indicate how much of the company is financed by debt and equity
E) Indicate instant debt-paying ability
F) Assess the profitability of the investment by common stockholders
G) Indicate future earnings prospects
H) Indicate the extent to which earnings are being distributed to common stockholders
Current Ratio
A financial metric that measures a company's ability to pay off its short-term liabilities with its short-term assets.
Liabilities
Financial obligations or debts that a company owes to others.
Debt
Money owed by one party to another under the condition of repayment, often including interest charges.
- Learn to execute the calculations and understand the meanings behind various financial ratios.
Verified Answer
MS
Maleia StewartMay 29, 2024
Final Answer :
C
Explanation :
The current ratio is a measure of a company's ability to pay current liabilities, as it compares current assets to current liabilities.
Answer: E
The current ratio can also indicate instant debt-paying ability, as it shows the company's ability to pay its short-term obligations with its current assets.
Note: Although the current ratio can provide some information about a company's profitability and financial structure, it is not the best ratio to use for those purposes.
Answer: E
The current ratio can also indicate instant debt-paying ability, as it shows the company's ability to pay its short-term obligations with its current assets.
Note: Although the current ratio can provide some information about a company's profitability and financial structure, it is not the best ratio to use for those purposes.
Learning Objectives
- Learn to execute the calculations and understand the meanings behind various financial ratios.