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Accounting Ratios — Accountancy STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceAccountancyAccounting Ratios1 Mark
Question
In current ratio, current assets are compared with _________.
  1. Current profit
  2. Current liabilities
  3. Fixed assets
  4. Equity share capital
✓

Answer

  1. Current liabilities
Explanation:

The current ratio gives idea to the company's ability to payback its liabilities (debts & accounts payable) with its assets(cash,marketable securities,accounts receivable). As such, current ratio can be used to make a rough estimate of a company's financial health and its liquidity.

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