1.
The current ratio is calculated as:
A
Current Assets / Current Liabilities
B
Current Liabilities / Current Assets
C
Net Working Capital / Total Assets
D
Cash / Current Liabilities
View Answer
Correct Answer: A — Current Assets / Current Liabilities
Explanation:
The correct answer is A: Current Assets / Current Liabilities.
The current ratio measures a company's ability to pay off its short-term liabilities using its short-term assets. A ratio above 1 indicates the company has more current assets than current liabilities, suggesting good short-term liquidity. A ratio below 1 may indicate potential liquidity problems.