Denver Corporation and Cheyenne Company are in different industries. Denver's current ratio is 1.89, while Cheyenne's current ratio is 1.65. Therefore, is it safe to conclude that Denver's liquidity position is better than that of Cheyenne?
What will be an ideal response?
Answers will vary
The acceptable (or desirable) level of liquidity varies from one industry to another. A company's ability to pay its current liabilities depends on how reliably current operations generate cash. Therefore, comparisons between Denver and Cheyenne cannot be made based on this limited information.
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