Which of the following statements is an accurate interpretation of the current ratio?
A)A current ratio of 1.5 or higher is considered a high-risk ratio.
B)A current ratio below 1.00 is considered a good and safe ratio.
C)A current ratio of 2.0 indicates strong ability to pay current liabilities.
D)A current ratio of 0.60 or lower is a good and safe ratio.

Question

Quizplus · Accepted Answer

A current ratio of 2.0 indicates that the company has twice as many current assets as current liabilities, which suggests a strong ability to pay current liabilities. Choices A, B, and D are incorrect because they either represent inaccurate interpretations or suggest a low or unsafe current ratio.

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