Define current ratio.
Chapter5: Completing The Accounting Cycle
Section: Chapter Questions
Problem 14Q: Describe the calculation required to compute the current ratio. Explain the significance.
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Ratio analysis: The analysis of a company using the financial ratios and comparing its trends and measure its performance within the company and the companies of the industry is known as ratio analysis. The main categories of ratio analyses are liquidity ratios, profitability ratios, activity ratios, and leverage ratios.
Liquidity ratios: Liquidity ratios measure the short-term capacity of a company to pay its maturing obligations and to meet unexpected requirements for cash.
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