Question

Which of the following items is used to compute the current ratio? (2 answers)

A) Current assets
B) Long-term liabilities
C) Net income
D) Shareholders' equity

Answer 1

The two items which are used to compute the current ratio are current assets and shareholders' equity.

Step-by-step explanation:

The items used to compute the current ratio are:

1. Current assets: Current assets include cash, accounts receivable, inventory, and other assets that can be easily converted into cash within one year.
2. Shareholders' equity: Shareholders' equity represents the ownership interest in a company and includes common stock, retained earnings, and other equity components.