Final answer:
The ratio that measures a company's ability to pay off its current liabilities with its current assets is known as the current ratio, calculated by dividing current assets by current liabilities.
Step-by-step explanation:
The ratio that measures the ability to pay current liabilities with current assets is called the current ratio. It is calculated by dividing current assets by current liabilities.
Current assets include cash, accounts receivable, and inventory, while current liabilities include accounts payable and short-term debt.
For example, if a company has $500,000 in current assets and $200,000 in current liabilities, the current ratio would be 2.5 (500,000 ÷ 200,000). A current ratio above 1 indicates that the company has enough current assets to cover its current liabilities.
The ratio that measures the ability to pay current liabilities with current assets is known as the current ratio. The current ratio is calculated by dividing current assets by current liabilities. For example, if a company has current assets of reserves 30, bonds 50, and loans 50, the total current assets would be 130. If the company has current liabilities consisting of deposits of 300, then the current ratio would be 130 divided by 300, resulting in a ratio of approximately 0.43. This signifies that for every dollar of current liabilities, the company has 0.43 dollars of current assets. A higher ratio indicates a greater ability to pay off current liabilities with current assets.