alleryStart learning →The current ratio is described as closely related to:
ARetained earnings
BGoodwill balance
CShare price level
DWorking capital
Answer & Solution
Correct answer: D. Working capital
1. Two measures use the same two inputs.
2. Current assets and current liabilities are both short-term.
3. The current ratio is closely related to working capital.
4. It represents the current assets divided by current liabilities.
_Source: OpenStax Principles of Finance (CC BY 4.0), Ch 6 'Measures of Financial Health'_
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