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Question
In current ratio, current assets are compared with _________.
In current ratio, current assets are compared with _________.
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Solution
The correct option is B Current liabilities
The current ratio gives idea to the company's ability to payback its liabilities (debts & accounts payable) with its assets(cash,marketable securities,accounts receivable). As such, current ratio can be used to make a rough estimate of a company's financial health and its liquidity.
The current ratio gives idea to the company's ability to payback its liabilities (debts & accounts payable) with its assets(cash,marketable securities,accounts receivable). As such, current ratio can be used to make a rough estimate of a company's financial health and its liquidity.
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