Business FinancesQuestion 1136 of 1605
The current ratio is calculated as:
a.Cash / revenue
b.Total liabilities / total equity
c.Current assets / current liabilities
d.Net income / total assets
Explanation
Current ratio = current assets / current liabilities. It measures the ability to pay short-term obligations. A ratio of 2:1 is often considered healthy; below 1:1 signals liquidity trouble.
Practice all 1605 questions free — no signup required.
Related questions on this topic
- Why can a contractor be profitable on paper yet still run out of cash?
- A contractor offers 2/10, net 30 terms and pays a $10,000 supplier invoice on day 8. How much does he pay?
- A cash flow projection primarily helps a contractor:
- A contractor has current assets of $200,000 and current liabilities of $80,000. What is his current ratio?
- Which financial statement reports a company's assets, liabilities, and owner's equity at a single point in time?
- The fundamental accounting equation is:
Last reviewed: · editorial process
Sen Lin, PrepPass Founder · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)