Which of the Following Does the Current Ratio Measure

question 127

Multiple Choice

Which of the following does the current ratio measure?

• A) The company's overall ability to pay liabilities
• B) The company's ability to pay current liabilities with current assets
• C) The proportion of the company's assets that are financed with debt
• D) The company's rate of cash flow

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Definitions:

Bondholders

Individuals or institutions that hold the debt securities issued by corporations or governments, entitling them to receive interest and the return of principal.

Present Value

The value today of a future monetary sum or sequence of cash inflows, calculated with a defined return rate.

Interest Rate

The rate of a loan designated as interest to the borrower, typically represented as an annual percentage of the loan's unpaid balance.

Present Discounted Value

The value of a future amount of money in today's terms, calculated by applying a discount rate to account for time and risk.