A measure of a farmer's ability to pay their bills this year is given by the farmer's

• A. Current ratio
• B. Debt-to-equity ratio
• C. Quick ratio
• D. Net income

Answer: (A)

Liquidity is about a farm’s ability to meet short-term obligations. The current ratio captures this by comparing what is owned in the near term (current assets) to what must be paid in the near term (current liabilities). A higher ratio means more cushion to cover bills within the coming year, which is exactly what this measure asks for. In farming, current assets include cash, receivables, and inventories that can be turned into cash, while current liabilities are debts and payables due within a year, so the ratio directly reflects the capacity to pay those imminent obligations.

Debt-to-equity focuses on financing structure and long-term leverage, not immediate payability. Net income reflects profitability, not the ability to settle short-term bills. The quick ratio is similar but excludes inventory, which can be a meaningful, sellable asset for a farm, so it’s a stricter measure and not as directly tied to paying upcoming bills.