The Current Ratio Is a Measure of the Ability of a Company

question 16

True/False

The current ratio is a measure of the ability of a company to pay its short-term liabilities out of short-term assets.

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Definitions:

Subsidiary Company

A company controlled by another company, referred to as the parent company, through ownership of more than 50% of its voting stock.

Marketable Securities

Financial instruments that are easily convertible into cash due to their high liquidity and short maturity period.

Trading Securities

Financial instruments bought and held primarily for the purpose of selling them in the near term to profit from price changes.

Short-Term Investments

Financial assets that are easily convertible to cash usually within a year, intended for temporary holding.