question archive The formula used to calculate current ratio is OA) Current liabilities / Inventory B) Current assets / Current liabilities C) Current liabilities / Current assets G D) Inventory / Current liabilities E) None of them
The formula used to calculate current ratio is OA) Current liabilities / Inventory B) Current assets / Current liabilities C) Current liabilities / Current assets G D) Inventory / Current liabilities E) None of them
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The formula used to calculate current ratio is OA) Current liabilities / Inventory B) Current assets / Current liabilities C) Current liabilities / Current assets G D) Inventory / Current liabilities E) None of them
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The correct option is "B"
Current Ratio = Current asset / Current Liability
This ratio shows how much Current assets are available to cover the Current Liabilities of the company. If the ratio is more than 1, then it shows that current assets are more as compared to current liabilities, so the use of the current asset can coverup current liabilities.
