Which of the following is a key indicator of working capital efficiency?

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Question: Which of the following is a key indicator of working capital efficiency?

Options:

Correct Answer: Current Ratio

Solution:

The Current Ratio is a key indicator of working capital efficiency, measuring the ability to cover short-term liabilities.

Which of the following is a key indicator of working capital efficiency?

Which of the following is a key indicator of working capital efficiency?

Step 1: Understand what working capital is. Working capital is the money a company has to cover its short-term expenses.
Step 2: Learn about short-term liabilities. These are debts or obligations that a company needs to pay within a year.
Step 3: Know what the Current Ratio is. The Current Ratio is calculated by dividing current assets by current liabilities.
Step 4: Realize why the Current Ratio is important. It shows if a company has enough assets to pay off its short-term debts.
Step 5: Conclude that the Current Ratio is a key indicator of working capital efficiency because it measures the company's ability to manage its short-term financial obligations.

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