A current ratio greater than 1 can tell us that the company ________
A) should be able to cover the current liabilities
B) should be able to keep away from short-term cash problems
C) may have too much capital tied up in current assets
D) All of these
Answer: D
Explanation: D) A current ratio greater than 1 tells us that the current assets should be able to cover the current liabilities and keep the company away from short-term cash problems. However, if this number is much greater than 1, we may have too much capital tied up in current assets.
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What will be an ideal response?
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