The Current Ratio Measures ________

question 204

Multiple Choice

The current ratio measures ________.

• A) a company's ability to sell its long-term assets
• B) a company's ability to pay current liabilities from its total assets
• C) a company's ability to pay current liabilities from current assets
• D) a company's profitability during a particular period

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Definitions:

Differential Cost

The difference in total cost that will result from selecting one alternative over another in decision-making situations.

Alternatives

Various options or choices available in a decision-making process.

Relevant Costs

Costs that will be affected by a decision and are future-oriented.

Predetermined Overhead Rate

A rate used to charge manufacturing overhead cost to jobs that is established in advance for each period. It is computed by dividing the estimated total manufacturing overhead cost for the period by the estimated total amount of the allocation base for the period.