Which financial ratio relates most closely to a company's ability to pay its short-term debts?
A) Receivables turnover
B) Debt to equity ratio
C) Return on assets
D) Current ratio
Answer: D
The current ratio is
A) Current assets divided by current liabilities.
B) Cash and short-term investments divided by current liabilities.
C) Cash, short-term investments, and accounts receivable divided by current liabilities.
D) Cash, short-term investments, accounts receivable, and inventory divided by current liabilities.
Answer: A
Working capital is
A) Current assets divided by current liabilities.
B) Current assets minus current liabilities.
C) Cash, short-term investments, and accounts receivable divided by current liabilities.
D) Cash, short-term investments, and accounts receivable minus current liabilities.
Answer: B
