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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Which of the following measures indicates the ability of a firm to pay its current liabilities
A. Working capital
B. Current ratio
C.Quick ratio
D. All of the above

To determine

Concept Introduction:

Current Ratio:

Current Ratio is the measure of the company's ability to pay off its current liabilities using its current assets. It is calculated by dividing the total current assets by total current liabilities. The formula of the current ratio is as follows:

  Current Ratio=Current assetsCurrent liabilities

To Choose:

The measure that indicates the ability of a firm to pay its current liabilities.

Explanation

Explanation for correct answer:

All the given measures indicate the ability of a firm to pay its current liabilities. Hence, correction option is D.

Explanation for incorrect answers:

A. All the given measures indicate the ability of a firm to pay its current liabilities...

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