For several years, Flame Corporation has had a current ratio that was consistent with other companies in its industry.For the most recent year, Flame's current ratio was significantly higher than that for the industry.What is the best possible explanation for this situation?
A)The other companies in the industry were not as profitable.
B)Flame's liquidity has improved or is not leveraging financial resources effectively.
C)Flame has less property, plant and equipment than other companies.
D)Flame has too much debt.

Question

Quizplus · Accepted Answer

A significantly higher current ratio than the industry suggests that Flame Corporation has improved its liquidity or is not effectively leveraging financial resources.

For Several Years, Flame Corporation Has Had a Current Ratio