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31 January, 15:23

The current ratio is calculated as total current assets divided by total current liabilities.

A. True

B. False

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Answers (1)
  1. 31 January, 16:44
    0
    A. True

    Explanation:

    The current ratio shows a relationship between the current assets and the current liabilities

    In mathematically,

    Current ratio = Total Current assets : total current liabilities

    where,

    The current assets = Cash and cash equivalents + Short-term investments + Accounts and notes receivable + Inventories + Prepaid expenses and other current assets

    And, current liabilities would be

    = Short-term obligations + Accounts payable

    This current ratio is always expressed in times plus its reflects the liquidity of the business organization
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