The rule of thumb for the current ratio is 2:1.When would a current ratio below this threshold not necessarily be a concern for a company?
A)When cash flows are steady and reliable
B)When inventories are high
C)When accounts receivable balances are high
D)None of these choices are correct

Question

Quizplus · Accepted Answer

A current ratio below 2:1 might not be concerning if a company has steady and reliable cash flows, as this indicates the company can meet its short-term obligations without relying heavily on selling inventory or collecting receivables.

The Rule of Thumb for the Current Ratio Is 2:1