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Commercial Pilot Licence (CPAER) – Canada · Question

When analyzing financial statements, which ratio provides insight into a company's ability to meet its short-term obligations?

The current ratio (current assets / current liabilities) is a primary liquidity ratio that measures a company's ability to cover its short-term liabilities with

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Question: When analyzing financial statements, which ratio provides insight into a company's ability to meet its short-term obligations?

Answer options:

  • Debt-to-equity ratio.
  • Gross profit margin. ✅ Current ratio.
  • Return on assets.

Correct answer: Current ratio.

Explanation: The current ratio (current assets / current liabilities) is a primary liquidity ratio that measures a company's ability to cover its short-term liabilities with its short-term assets.

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