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Makayla Blount
on Nov 13, 2024

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The current ratio is

A) used to evaluate a company's liquidity and short-term debt-paying ability
B) a solvency measure that indicates the margin of safety for bondholders
C) calculated by dividing current liabilities by current assets
D) calculated by subtracting current liabilities from current assets

Current Ratio

A financial metric that evaluates a company's ability to pay off its short-term liabilities with its current assets.

Short-Term Debt-Paying Ability

Refers to a company's capability to meet its short-term financial obligations as they come due.

Liquidity

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

  • Analyze a company's liquidity through current ratio calculation and understand its significance.
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Duggirala KarthiekNov 17, 2024
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