Answer the following questions regarding the current ratio:
Current Ratio Question Answer
What does the current ratio measure?
How is the current ratio calculated?
When analyzing the current ratio, what is the rule of thumb?
What will be an ideal response
Current Ratio Question Answer
What does the current ratio measure? The current ratio measures the company's ability to pay current liabilities from current assets.
How is the current ratio calculated?
Total current assets / Total current liabilities
When analyzing the current ratio, what is the rule of thumb? A strong current ratio is 1.50, which indicates that the business has $1.50 in current assets for every $1.00 in current liabilities.
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