The current ratio is

A) calculated by dividing current liabilities by current assets.
B) used to evaluate a company's liquidity and short-term debt paying ability.
C) used to evaluate a company's solvency and long-term debt paying ability.
D) calculated by subtracting current liabilities from current assets.

Current Ratio

A financial metric assessing a firm's capacity to settle short-term debts or obligations due within a year, determined by dividing current assets by current liabilities.

Current Liabilities

Current Liabilities are obligations a company is expected to pay within the upcoming year, including accounts payable, short-term loans, and other accrued liabilities.

Liquidity

A measure of how easily assets can be converted into cash without significant loss in value, important for meeting short-term obligations.