Which of the following statements about the current ratio is NOT true?
A) The current ratio is also known as the working capital ratio.
B) The interpretation of the current ratio depends very much on the nature of the enterprise and its way of doing business.
C) A ratio greater than 2:1 is a guarantee of survival.
D) A positive working capital indicates that the business has sufficient funds to pay its commitments.

Question

Quizplus · Accepted Answer

A ratio greater than 2:1 is not a guarantee of survival. While a current ratio of 2:1 or higher may indicate that a business has enough current assets to cover its current liabilities, it does not guarantee the company's survival as it depends on various factors such as industry trends, competition, management efficiency, and economic conditions.

Which of the Following Statements About the Current Ratio Is