Series 79 practice questioneasyFinancial Statement Analysis
Which ratio best measures a company’s short-term liquidity when a banker is checking whether current assets cover current liabilities?
- ADebt-to-equity ratio
- BReturn on equity
- CCurrent ratio✓ Correct answer
- DEV/EBITDA
Explanation
Why C — Current ratio
Current ratio The current ratio compares current assets with current liabilities and therefore focuses directly on near-term liquidity. Debt-to-equity addresses leverage, return on equity addresses profitability, and EV/EBITDA is a valuation multiple.
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