Which of the Following Statements Does Not Properly Describe the Current

question 61

Multiple Choice

Which of the following statements does not properly describe the current ratio?

• A)It measures the ability of a firm to pay its debts in the short-run.
• B)It is current assets divided by current liabilities.
• C)It is a measure of a firm's short-run liquidity.
• D)It measures a firm's ability to pay its long-term debts as they mature.

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Definitions:

Savings Account

A financial account at a bank or similar institution that ensures the security of the original sum while yielding a slight return in interest.

Compounded Monthly

Refers to the process where interest is calculated and added to the principal sum each month, leading to interest being earned on interest from prior months.

Student Loans

Loans offered to students to finance their education, which typically have lower interest rates and are repayable after graduation.

Compounded Monthly

This refers to the interest calculation method where interest is added to the principal balance monthly, causing the amount of interest to grow each month based on the new balance.