Certified Valuation Analyst (CVA) Practice Exam

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Prepare for the Certified Valuation Analyst Exam. Enhance your skills with flashcards and multiple-choice questions, complete with hints and explanations. Begin your journey to becoming a certified professional!

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Which of the following represents the current ratio derived from the financial statements?

The correct answer is: 1.9

The current ratio is a financial metric that assesses a company's ability to meet its short-term obligations with its short-term assets. It is calculated by dividing current assets by current liabilities. A current ratio greater than 1 suggests that a company has more current assets than current liabilities, which generally indicates good short-term financial health. In this scenario, a current ratio of 1.9 indicates that for every dollar of current liabilities, the company has $1.90 in current assets. This level of coverage demonstrates a strong liquidity position and implies that the company is well-equipped to cover its short-term obligations. While other potential ratios could indicate varying levels of liquidity (for example, ratios below or above 1), the specific value of 1.9 suggests a solid financial standing in terms of liquidity, making it a positive indicator for stakeholders assessing the company’s short-term financial viability.