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accounting
3 Answers
a current ratio of 5 is uually an indication that the firm:
a. has a low degree of liquidit
b. has a reasonable degree of liquidity
c. has not made the mst productive use of its assets
d. has made the most producive use of its assets
thank you!
a. has a low degree of liquidit
b. has a reasonable degree of liquidity
c. has not made the mst productive use of its assets
d. has made the most producive use of its assets
thank you!
Answers
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Current Ratio - The current ratio basically tells you if a company has enough assets in case it needs to immeaditally pay off any debt. Total Current Assets/ Total Current Liabilities = Current Ratio. The higher the current ratio, the better of a company is. Any current ratio above 1 is considered good. Companies just starting out will usually have a current ratio less than 1.
I'm not qualified to answer this but given that a current ratio of assets to liabilities of 2:1 is usually considered to be acceptable, it seems to me that 5 is on the high side so it seems the company may not be efficiently using its current assets. So c.
It's not a or b because 5 represents a high degree of liquidity .
I'm not qualified to answer this but given that a current ratio of assets to liabilities of 2:1 is usually considered to be acceptable, it seems to me that 5 is on the high side so it seems the company may not be efficiently using its current assets. So c.
It's not a or b because 5 represents a high degree of liquidity .
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