The Current Ratio Is Computed as Follows

question 95

Multiple Choice

The current ratio is computed as follows:

• A)Current assets divided by current liabilities.
• B)Current assets minus current liabilities.
• C)Current assets divided by total assets.
• D)Retained earnings divided by current liabilities.

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Definitions:

Debt-Equity Ratio

The ratio that measures the relative proportion of shareholders' equity and debt used to finance a company's assets.

After-Tax Earnings

The amount of net income a firm has after all taxes have been paid, representing the company's profitability.

Retained Earnings

Profits that a company keeps or retains rather than distributing to shareholders as dividends, often used for reinvestment.

Taxable Income

The amount of income subject to tax, after deductions and exemptions, as determined by tax laws.