Which of the following statements is true?
A) A current ratio of 1.2 to 1 indicates that a company's current assets are less than its current liabilities.
B) All companies, regardless of size, should have a current ratio of at least 2:1.
C) The current ratio is a more dependable indicator of liquidity than working capital.
D) The use of the current ratio does not make it possible to compare companies of different sizes.

Question

Quizplus · Accepted Answer

The current ratio is a more dependable indicator of liquidity than working capital because it provides a relative measure of a company's ability to cover its short-term obligations with its short-term assets.

Which of the Following Statements Is True