The current ratio is used to evaluate a company's liquidity and short-term debt paying ability. It is calculated by dividing a company's current assets by its current liabilities. A higher current ratio indicates that a company is better able to pay off its short-term debts and obligations.

1. The current ratio is:
a. Is a solvency measure that indicated the margin of safety of a noteholder or bondholder.
b. Calculated by subtracting current liabilities from current assets.
c. Calculated by dividing current liabilities by current assets.
d. Used to evaluate a company's liquidity and short-term debt paying ability.
Solution
The Current ratio is 'used to evaluate a company's liquidity and short-term debt paying
ability'
i.e. option D
Current Ratio = Current Assets / Current Liabilities
Current Assets include Cash & Cash Equivalents, Inventory & Accounts Receivables. Also
known as Liquidity Ratio.
This ratio measures a firm's ability to pay its short term liabilities with its current assets. The
higher the ratio, the higher the liquidity of the company.