Based on Washington's current ratio,which of the following statements is true regarding the company?
A)Washington's current ratio has increased,indicating that the company is in a more favorable position to obtain short-term credit than in 2015.
B)Washington's current ratio has decreased,indicating that the company is in a less favorable position to obtain short-term credit than in 2015.
C)Washington's current ratio has increased,indicating that the company is in a less favorable position to obtain short-term credit than in 2015.
D)Washington's current ratio has decreased,indicating that the company is in a more favorable position to obtain short-term credit than in 2015.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. A higher current ratio indicates that a company is in a more favorable position to obtain short-term credit because it has more current assets to cover its current liabilities. Conversely, a lower current ratio indicates that a company is in a less favorable position to obtain short-term credit because it has fewer current assets to cover its current liabilities.

Since the question states that Washington's current ratio has decreased, it means that the company is in a less favorable position to obtain short-term credit than in 2015. Option B is the only choice that reflects this explanation.

Based on Washington's Current Ratio,which of the Following Statements Is