The current ratio isO a solvency measure that indicates the margin of safety for bondholdersO calculated by dividing current liabilities by current assetscalculated by subtracting current liabilities from current assetsO used to evaluate a company's liquidity and short-term debt-paying abilityQuestion 19On the statement of cash flows, a $9,000 gain on the sale of fixed assets would beO added to net income in converting the net income reported on the income statement to cash flows from operating activitiesO deducted from net income in converting the net income reported on the income statement to cash flows from operating activitiesO deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividendsO added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends

Answered: The current ratio is O a solvency…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The current ratio is
O a solvency measure that indicates the margin of safety for bondholders
O calculated by dividing current liabilities by current assets
calculated by subtracting current liabilities from current assets
O used to evaluate a company's liquidity and short-term debt-paying ability
Question 19
On the statement of cash flows, a $9,000 gain on the sale of fixed assets would be
O added to net income in converting the net income reported on the income statement to cash flows from operating activities
O deducted from net income in converting the net income reported on the income statement to cash flows from operating activities
O deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends
O added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends

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Introduction: The current ratio is a liquidity ratio used to evaluate a company's ability to pay short-term or one-year obligations. It shows to investors and analysts how a company might utilize its current assets on its balance sheet to pay down current debt and other payables.

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