Choose the Correct Explanation for the Current Ratio

question 9

Multiple Choice

Choose the correct explanation for the current ratio.

• A)A measure of a business's ability to pay debts and obligations due beyond 1 year
• B)A measure of a business's ability to pay debts and obligations due within 2 years
• C)A measure of a business's ability to pay debts and obligations due within 1 year
• D)A measure of a business's ability to pay debts and obligations due within 1 year,excluding the value of inventory and prepaid expenses

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Definitions:

Debt Due

The amount of money that is owed and should be paid, typically by a specific deadline or upon demand.

Priority Loan

A type of loan that is given precedence over other debts, often in the context of repayment terms and bankruptcy proceedings.

Collateral

Assets pledged by a borrower to secure a loan or credit, which the lender can seize if the borrower defaults.

Defaults

Situations in which parties fail to fulfill their obligations under a contract or agreement.