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The current ratio is calculated as total current assets divided by total current liabilities.

A. True
B. False

1 Answer

3 votes

Answer:

A. True

Step-by-step explanation:

The current ratio shows a relationship between the current assets and the current liabilities

In mathematically,

Current ratio = Total Current assets ÷ total current liabilities

where,

The current assets = Cash and cash equivalents + Short-term investments + Accounts and notes receivable + Inventories + Prepaid expenses and other current assets

And, current liabilities would be

= Short-term obligations + Accounts payable

This current ratio is always expressed in times plus its reflects the liquidity of the business organization

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