The ratio of current assets to current liabilities is known as:
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A.
Acid-test (or quick) ratio
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B.
Debts ratio
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C.
Current ratio
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D.
Liquidity ratio
Correct Answer:
C. Current ratio
Explanation:
The current ratio is a financial metric used to evaluate a company's short-term liquidity by comparing its total current assets to its total current liabilities. It serves as an indicator of whether a business has sufficient resources to cover its debts that are due within a single year. While other liquidity measures like the acid-test ratio provide a more conservative view by excluding inventory, the current ratio offers a comprehensive snapshot of all short-term assets available to meet immediate financial obligations.
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