Which of the following statements is generally incorrect from an investor's perspective?
A) A 1:1 current ratio is generally preferred over a 1.5:1 current ratio.
B) A 20-day average collection period for accounts receivable is generally preferred over a 30-day average collection period.
C) A 5% dividend yield is generally preferred over a 3% dividend yield.
D) A 10% net margin is generally preferred over an 8% net margin.

Question

Quizplus · Accepted Answer

A higher current ratio indicates greater liquidity and is generally preferred by investors, as it signals that the company is better equipped to meet its short-term obligations. A lower current ratio may indicate that the company may struggle to pay its debts in the near future. Therefore, a 1.5:1 current ratio is generally preferred over a 1:1 current ratio.

Which of the Following Statements Is Generally Incorrect from an Investor's