Question: Which ratio measures a company\'s ability to pay short-term obligations?
Options:
Current Ratio
Debt to Equity Ratio
Return on Equity
Gross Profit Margin
Correct Answer: Current Ratio
Solution:
The Current Ratio measures a company\'s ability to pay its short-term liabilities with its short-term assets.
Which ratio measures a company's ability to pay short-term obligations?
Practice Questions
Q1
Which ratio measures a company's ability to pay short-term obligations?
Current Ratio
Debt to Equity Ratio
Return on Equity
Gross Profit Margin
Questions & Step-by-Step Solutions
Which ratio measures a company's ability to pay short-term obligations?
Step 1: Understand what short-term obligations are. These are debts or liabilities that a company needs to pay within a year.
Step 2: Know what short-term assets are. These are resources a company can quickly convert to cash within a year, like cash, inventory, and accounts receivable.
Step 3: Learn about the Current Ratio. It is a financial metric that compares short-term assets to short-term liabilities.
Step 4: The formula for the Current Ratio is: Current Ratio = Current Assets / Current Liabilities.
Step 5: A higher Current Ratio means the company is better able to pay its short-term obligations.
No concepts available.
Soulshift Feedback×
On a scale of 0–10, how likely are you to recommend
The Soulshift Academy?
