Question

An optimal current ratio should be greater than 1.0.

a. true

b. false

Answer 1

True.

Current ratio is a part of Liquidity ratio, and it means that whether the company can pay off its obligations, be it short-term or long-term. It checks the current total assets of a company against that of the current total liabilities.

Current Ratio = Current Assets/Current Liabilities;

The Ideal Current ratio is greater than 1. If it is less than 1, it means that the company is not able to pay off its obligations. Whereas, if it is greater than 1, it means that the company can pay off its obligations and still have some leftover.

Answer 2

Answer:

Answer ♡

True.

• Current ratio is a part of Liquidity ratio, and it means that whether the company can pay off its obligations, be it short-term or long-term. It checks the current total assets of a company against that of the current total liabilities.

Learn More ♡

• Current Ratio = Current Assets/Current Liabilities;
• The Ideal Current ratio is greater than 1. If it is less than 1, it means that the company is not able to pay off its obligations. Whereas, if it is greater than 1, it means that the company can pay off its obligations and still have some leftover.