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What is the current ratio?

  1. A Current assets divided by current liabilities
  2. B Current liabilities divided by current assets
  3. C Cash divided by current liabilities
  4. D Current assets minus inventory divided by current liabilities
Answer

Current assets divided by current liabilities

The current ratio measures short-term liquidity. The last option describes the quick ratio, which excludes inventory as the least liquid current asset.

All Accounting MCQs

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