Which of the following statements is an accurate interpretation of the current ratio?
A) A current ratio of less than 1.0 indicates that the company will probably have difficulty in paying its current liabilities on time.
B) A current ratio of more than 1.5 is a good current ratio and the company will probably be able to pay its current liabilities on time.
C) Both A and B are correct.
D) Both A and B are incorrect.

Question

Quizplus · Accepted Answer

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year. A ratio under 1.0 suggests potential liquidity problems, while a ratio above 1.5 is generally considered healthy.

Which of the Following Statements Is an Accurate Interpretation of the Current