Financial ratios

Question

A higher current ratio indicates the company greater degree of Liquidity.

( true ) or ( false with correction)

Answer 1

I higher current ratio in fact means the firm has a higher liquidity. That's because the availability of current assets is stronger relative to the current liabilities. Remember that current liabilities are short-term obligations or obligations due in less than a year. So the bigger the current assets, compared to the current liabilities, the better the financial conditions of the firm.