A Liquid ratio lower than 1:1 shows
A) under-trading
B) under-investment
C) over-trading
D) over-investment
Answers
Answer:
A under- trading your answer
Answer:
B) under-investment
Explanation:
When it comes to financing, liquidity is an important aspect to consider. And the liquidity ratio is an essential accounting tool that is used to determine the current loan repayment capacity of the borrower. Simply, this ratio shows whether an individual or business can pay short-term dues without any external financial support. Considering the liquid assets, the current financial obligations are analyzed to validate the security limits of the company. The liquidity ratio is a financial ratio that tells whether a company has enough working capital to pay off its short-term debt. Working capital comes from current assets - specifically cash and cash equivalents (such as marketable securities that can be sold to generate cash flow). The simplest way to calculate a company's liquidity ratio is by dividing its current assets by its current liabilities. Often financial analysts focus solely on short-term obligations; Long-term financial obligations are designed to be paid back over several years and do not necessarily reveal financial health.
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