What Does the Current Ratio Measure

question 57

Multiple Choice

What does the current ratio measure?

• A)use of assets.
• B)profitability.
• C)investments.
• D)liquidity.

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Definitions:

Units-of-Activity Method

A depreciation method where the expense is based on the number of hours used or units produced by an asset, rather than the passage of time.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting wear and tear, deterioration, or obsolescence.

Residual Value

The estimated value of an asset at the end of its useful life.

Component Depreciation

The practice of depreciating parts of an asset separately in order to more accurately reflect their useful lives and value.