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Current Ratio is a reflection of profit generating capacity of a business. State True or False ?
Not necessarily, current ratio clearly defines the current standing of profitability of a business at that particular point only, as there are way too many variables in future which will define the profitability of a business in future when that time comes, however current profitability is something to be happy about as it surely sets tone for future with right mix of product, intelligence and human resource in the bloodstream are the only things that have and will define profit generation in future.
I WILL SAY TRUE BEACAUSE YOU CAN SEE FROM CURRENT RATIO THAT HOW COMPANY IS UTILIZING IT RESOURCES ( ASSETS ) TO FULLFILL ITS OBLIGATIONS ( LIABILITIES + CAPITAL)
SO YOU CAN ESTIMATE ITS CAPCAITY OF EARNING PROFIT
