The current ratio measures:

A Profitability

B A company ability to pay short-term obligations using its current assets

C Long-term solvency

D Market value

✓ Correct Answer: Option B

Current ratio = current assets / current liabilities. >1 suggests sufficient short-term liquidity. 1.5-2 typical for healthy companies. Too high may indicate inefficient asset use.

💡 Why is B) the correct answer?

The correct answer to the question "The current ratio measures:" is Option B: A company ability to pay short-term obligations using its current assets.

The other options — A) Profitability, C) Long-term solvency, D) Market value — are incorrect for this Pre-MBA Exam Prep question. As explained above: Current ratio = current assets / current liabilities. >1 suggests sufficient short-term liquidity. 1.5-2 typical for healthy companies. Too high may indicate inefficient asset use.

📚 About This Pre-MBA Exam Prep Practice Question

This 1-level Pre-MBA Exam Prep question from the Finance topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free Pre-MBA Exam Prep practice test or use flashcards for spaced repetition review.

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The current ratio measures:

✓ Correct Answer: Option B

📚 About This Pre-MBA Exam Prep Practice Question

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