The current ratio is an indicator of which following characteristic of an organization?
Answer: D) The liquidity in the short term
- A) The current level of profitability
- B) The future level of profitability
- C) The investment potential
- D) The liquidity in the short term
- E) None of these
Explanation
D) The liquidity in the short term. The current ratio is current assets divided by current liabilities. It shows whether a firm can pay what falls due within a year from assets it can turn into cash within a year. It says nothing direct about profit or investment appeal.
Asked in: SGFL 2017
Topic: Arithmetic