Which of the following statements does not properly describe the current ratio?

A. It measures the ability of a firm to pay its debts in the short-run.

B. It is current assets divided by current liabilities.

C. It is a measure of a firm's short-run liquidity

D. It measures a firm's ability to pay its long-term debts as they mature

D. It measures a firm's ability to pay its long-term debts as they mature

Explanation:

The current ratio is a ratio of current assets and the current liability which is required to judge the liquidity of the short term.

Current ratio = (Total Current assets) : (total current liabilities)

It is always expressed in times

The current assets equal to

= Cash balance + Short-term investments + Accounts and notes receivable + Inventories + Prepaid expenses, etc

And, the current liabilities

= Short-term obligations + Accounts payable