Question

The current ratio is A. current assets divided by current liabilities. B. current assets minus current liabilities. C. current assets plus current liabilities. D. current assets multiplied by current liabilities.

Answer 1

Answer: Current assets divided by current liabilities

Explanation: Current ratio is a liquidity ratio commonly used by analyst to evaluate the ability of company to pay for its short term liabilities with the given level of short term liquid assets. The difference between current assets and current liabilities is called the working capital.

The ideal current ratio as per the analyst is 1.