Which statement about the current ratio is accurate?

• A. Current ratio equals current assets divided by current liabilities; higher values indicate better short-term liquidity.
• B. Current ratio equals current liabilities divided by current assets.
• C. Current ratio equals net patient revenue divided by patient days.
• D. Current ratio equals cash divided by current liabilities.

Answer: (A)

The current ratio is a liquidity measure that tells you how well an organization can cover its short-term obligations with assets expected to be converted to cash within the next year. The accurate statement is that the current ratio equals current assets divided by current liabilities, and higher values indicate a stronger ability to meet near-term bills without additional financing. In healthcare, this means considering assets like cash, accounts receivable, and inventory that can be turned into cash within a year, against obligations such as accounts payable and short-term debt due within the same period. A higher ratio generally signals better short-term liquidity, though excessively high values can indicate underutilized resources. The other descriptions point to different concepts: the inverse would misstate liquidity, net patient revenue per patient day is a productivity or revenue metric, and cash divided by current liabilities is a tighter measure known as the cash ratio.