Question:

In financial ratios, the Current Ratio is:

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Current Ratio high = good liquidity = less risk of default.
  • Current Assets / Current Liabilities
  • Current Liabilities / Current Assets
  • Total Assets / Total Liabilities
  • Total Liabilities / Total Assets
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The Correct Option is A

Solution and Explanation

The Current Ratio checks if a firm can pay its short-term debts with its short-term assets. A ratio above 1 is good — it means the firm can pay current liabilities easily. It’s a key measure of liquidity.
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