The Current Ratio Is Calculated as Follows: Current Assets

question 37

True/False

The current ratio is calculated as follows: Current assets / Current liabilities.

---

Definitions:

Absorption Costing

An approach to pricing that involves including every manufacturing expense - like direct materials, direct labor, as well as fixed and variable overheads - in calculating the cost of a product.

Income Statement

A financial statement that reports a company’s financial performance over a specific accounting period.

Manufacturing Margin

The difference between the cost of goods produced and the sales revenue from those goods, indicating the profitability of manufacturing activities.

Contribution Margin

The difference between sales revenue and variable costs, used to cover fixed costs and contribute to profits.