Which of the following statements about the current ratio is false?
A)A firm with a higher current ratio is better off than one with a lower current ratio
B)It is determined by dividing current assets by current liabilities
C)It is affected by the accounting methods firms use
D)It is larger than the quick ratio

Question

Quizplus · Accepted Answer

The statement that a firm with a higher current ratio is always better off than one with a lower current ratio is false. A very high current ratio may indicate that a company is not efficiently using its current assets or its short-term financing facilities.

Which of the Following Statements About the Current Ratio Is