The Current Ratio Is a Type of ________ Ratio

question 129

Multiple Choice

The current ratio is a type of ________ ratio.

• A) leverage
• B) profitability
• C) activity
• D) liquidity

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Definitions:

Fixed Overhead

Costs that do not vary with production volume, such as rent, salaries, and insurance, required to operate a business regardless of production levels.

Variable Cost

Costs that change in proportion to the level of goods or services that a business produces.

Relevant Costs

Costs that are directly related to a specific management decision and that will change as a result of that decision.

Sunk Costs

Costs that have already been incurred and cannot be recovered, which should not affect future business decisions.