Which of the following measures indicates the ability of a firm to pay its current
liabilities?

e). all of the above

Multiple-choices

a). working capital

b). current ratio

c). quick ratio

e). all of the above

Explanation:

Working Capital is the difference between the total current asset and current liabilities. I.e., working capital = total current assents - total current liabilities. It is calculated to assess a  company's ability to pay its current liabilities.

The Current Ratio is calculated using the formula below.

current ratio= total current assets / total current liabilities. It measures the company's ability to meet its current liabilities with its current assets.

Acid-test Ratio (Quick Ratio) evaluates a company's ability to meet its current liabilities using cash or cash equivalents only. It measures the ability to repay current debts without having to sell inventory.

Quick ratio or acid test is calculated as follows= (cash + short-term investments + receivables) / total current assets

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