Financial ratios

Question

A Low current ratio (Less than 2) indicates___________.

A. higher acceptable current ratio.

B. higher return on equity.

C. higher return on Assets.

D. higher possibility of Insolvency.

Answer 1

Financial ratios

A Low current ratio (Less than 2) indicates___________.

A. higher acceptable current ratio.

B. higher return on equity.

C. higher return on Assets.

D. higher possibility of Insolvency.

D

Current Ratio is a liquidity measure. Low current ratio means the company has few liquid assets to cover near term liabilities.