The current ratio is calculated as total current assets divided by total current liabilities.

A. True

B. False

A. True

Explanation:

The current ratio shows a relationship between the current assets and the current liabilities

In mathematically,

Current ratio = Total Current assets : total current liabilities

where,

The current assets = Cash and cash equivalents + Short-term investments + Accounts and notes receivable + Inventories + Prepaid expenses and other current assets

And, current liabilities would be

= Short-term obligations + Accounts payable

This current ratio is always expressed in times plus its reflects the liquidity of the business organization