A company has a decreasing current ratio. Creditors should be concerned
A)with long-term solvency.
B)about the company's ability to pay current debts as they come due.
C)about the company's profitability.
D)about whether earnings per share is increasing or decreasing.

Question

Quizplus · Accepted Answer

Creditors should be concerned about a decreasing current ratio because it indicates that the company may have difficulty paying its current debts as they come due. This could potentially lead to default or bankruptcy, which would be a risk for creditors. Long-term solvency, profitability, and earnings per share are also important considerations, but a decreasing current ratio specifically relates to the company's ability to meet its short-term obligations.

A Company Has a Decreasing Current Ratio