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A lender divides a firm's current assets by its current liabilities. That measure is the:
ACutoff ratio
BCurrent ratio
CCutting ratio
DCosting ratio
Answer & Solution
Correct answer: B. Current ratio
1. It tests short-term paying power.
2. A value around 2 has traditionally been sought.
3. It is the current ratio.
_Source: OpenStax Introduction to Business, Chapter 14, Using Financial Information and Accounting._
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