Question

The current ratio is an example of an ____ ratio that measures a company's ability to turn assets into cash to pay its short-term debts.

a) Efficiency
b) Liquidity
c) Profitability
d) Solvency

Answer 1

The current ratio is a liquidity ratio that measures a company's ability to turn assets into cash to pay short-term debts.

Step-by-step explanation:

The current ratio is an example of a liquidity ratio that measures a company's ability to turn assets into cash to pay its short-term debts. The current ratio is calculated by dividing current assets by current liabilities. It is used to assess a company's short-term liquidity and its ability to meet its financial obligations. A higher current ratio indicates a better ability to cover short-term debts.