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Which of the following is NOT a component of the current ratio?

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Question: Which of the following is NOT a component of the current ratio?

Options:

  1. Cash
  2. Accounts Receivable
  3. Long-term Debt
  4. Inventory

Correct Answer: Long-term Debt

Solution: 

The current ratio is calculated using current assets (like cash, accounts receivable, and inventory) divided by current liabilities, so long-term debt is not included.

Which of the following is NOT a component of the current ratio?

Practice Questions

Q1
Which of the following is NOT a component of the current ratio?
  1. Cash
  2. Accounts Receivable
  3. Long-term Debt
  4. Inventory

Questions & Step-by-Step Solutions

Which of the following is NOT a component of the current ratio?
  • Step 1: Understand what the current ratio is. It is a financial metric that helps assess a company's ability to pay its short-term obligations.
  • Step 2: Identify what current assets are. Current assets include cash, accounts receivable, and inventory.
  • Step 3: Identify what current liabilities are. Current liabilities are debts or obligations that are due within one year.
  • Step 4: Know how to calculate the current ratio. The formula is: Current Ratio = Current Assets / Current Liabilities.
  • Step 5: Determine what is NOT included in the current ratio. Long-term debt is not included because it is not a short-term obligation.
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