In liquidity analysis, the ratio defined as Current assets divided by Current liabilities is known as which standard measure?

Introduction / Context:
The current ratio is a headline indicator of short-term solvency, expressing a firm's capacity to meet obligations due within one operating cycle using assets expected to be liquidated in the same period. It is widely used by lenders, owners, and sureties in construction to gauge near-term risk.

Given Data / Assumptions:

• Definition: Current assets / Current liabilities.
• Includes cash, receivables, inventory, and advances on the asset side.
• Compares to payables, short-term debt, accruals on the liability side.

Concept / Approach:

A ratio above 1.0 indicates current assets exceed current obligations; higher coverage suggests stronger liquidity, though excessive levels may imply idle working capital. The Quick ratio refines this by excluding inventories but is not asked here.

Step-by-Step Solution:

Verification / Alternative check:

Financial textbooks and credit checklists list the same naming and formula.

Why Other Options Are Wrong:

• Liquidity ratio is generic.
• Acid-Test excludes inventories; not the given formula.
• Debts ratio relates liabilities to assets; unrelated.

Common Pitfalls:

• Ignoring quality of receivables or obsolete inventory that inflate the ratio.

Final Answer:

Current ratio