A lower current ratio or acid-test ratio generally indicates a greater ability to pay current liabilities on a timely basis.A higher current ratio or acid-test ratio generally indicates a greater ability to pay current liabilities on a timely basis.

Question

Quizplus · Accepted Answer

A higher current ratio or acid-test ratio indicates that the company has more current assets available to pay off current liabilities, which is a greater ability to pay off these liabilities on a timely basis. Conversely, a lower current ratio or acid-test ratio indicates that the company has fewer current assets available to pay off current liabilities, which may signal a weaker ability to pay off these liabilities on a timely basis.

A Lower Current Ratio or Acid-Test Ratio Generally Indicates a Greater