Asked by Preston Tribble on Jul 03, 2024
Verified
How is the current ratio calculated and what does it measure?
Current Ratio
An indicator of a business's capacity to meet its obligations due in the next twelve months.
Calculated
Determined by mathematical methods; involving the process of using mathematical or logical techniques to derive a result.
Measure
A method or tool used to quantify or evaluate a variable or quantity.
- Evaluate fundamental financial ratios such as the current ratio and clarify their significance.
Verified Answer
NN
Nishat NaharJul 05, 2024
Final Answer :
The current ratio is current assets divided by current liabilities;it measures a business entity's short-run liquidity,which is the ability of a business entity to pay its short-term obligations using current assets.
Learning Objectives
- Evaluate fundamental financial ratios such as the current ratio and clarify their significance.