Question

Which of the following measures a company's ability to pay its current liabilities? 

• earnings per share 

• inventory turnover 

• times interest earned 

• current ratio

Answer 1

Answer: Option B, current ratio is correct.

The current ratio is the relationship between the current assets and current liabilities presented on the balance sheet of a business organization. It measures the ability of a business organization to pay its current obligations.

Current ratio \(=\frac{\text { Current assets }}{\text { Current liabilities }}\)

Answer 2

Correct answer----current ratio.

.

Current ratio tells the ability of a company to pay current liabilities.

Times interest earned on the other hand tells ability to pay interest on debts of the company.

Inventory turnover tells the ability of a company to collect receivable and finally earning per share is just a ratio of how much a company earned on each share outstanding.