This financial ratio measures the business's liquidity
A.days recivable ratio
B.average daily rate ratio
C.current ratio
D.profit margin
I chose the letter D.Can someone check my answer
C is my answer
To check your answer, let's briefly explain each financial ratio mentioned:
A. Days Receivable Ratio: This ratio measures the average number of days it takes for a company to collect payment on its accounts receivable.
B. Average Daily Rate Ratio: This is not a commonly used financial ratio, so it is unlikely to be the correct answer in this context.
C. Current Ratio: This ratio compares a company's current assets to its current liabilities, providing an indication of its short-term liquidity.
D. Profit Margin: This ratio measures a company's profitability by calculating the amount of profit it generates for each dollar of revenue.
Now, let's revisit the question. The correct answer is C. Current Ratio. This ratio specifically focuses on a company's liquidity by comparing its current assets (easily convertible to cash within a year) to its current liabilities (due within a year). The higher the current ratio, the more liquid a company is, indicating a greater ability to cover short-term obligations.