Question

when a business has a current ratio that is greater than one, which of the following best describes its ability to pay off its current liabilities? the business will likely be able to pay its current liabilities. the business may struggle to pay its upcoming liabilities. the business has fewer dollars in current assets than it has in current liabilities.

Explanation:

The current ratio is calculated as $\frac{\text{Current Assets}}{\text{Current Liabilities}}$. If the current ratio is greater than 1, it means $\text{Current Assets} > \text{Current Liabilities}$. Having more current assets than current liabilities implies the business has sufficient short - term resources to cover its short - term obligations (current liabilities), so it will likely be able to pay its current liabilities. The second option is incorrect because a current ratio > 1 does not suggest struggle in paying liabilities. The third option is incorrect as a current ratio > 1 means current assets are more than current liabilities, not fewer.

Answer:

The business will likely be able to pay its current liabilities.