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A- invest part of cash in short term investment B- try to attain more short term resources C- this ratio mean that current assets equal current liabilities D- all answers are false
D- All answers are false
Because Current ratio always in time not in percentage.
A-invest part of cash in short term investment The Current ratio is measure a business ability to pay its short-term and Long-term Debt. It’s not a %. Shows result in times. Greater than one (>1) means company has enough sources for pay their debts and has a good cash position.
If it’s more than2 or near it means company tie up their too much cash in Assets. Which would be value less? It’s should be invest in others project or in short-term investment.
The Current Ratio formula is:
It is not a percentage , but less than1 or above1 If less than one means that the assets do not cover liabilities, there is a risk . If the top of the opposite
88% Current ratio states the ratio to be 0.88:1 ie. for for every 1 unit of current liability to pay, the company has only 0.88 unit of its current assets.This shows that the company is not in a good state of being solvent. Current ratio should be of 2:1 (or 200%). 88% current ratio reflects bad image of company regarding its sovency.
A- invest part of cash in short term investment
this percentage suggests that the company in question would be unable to pay off its obligations if they came due at that point. While a current ratio below 1 shows that the company is not in good financial health
current asset is important ratio its measure the ability of the firm to meet current obligatioms the result of current ratio should be more than 1 so that the firm does not fall in financia diffculty
Means that current assets are not sufficient to pay for its current liabilities - not a good sign
B- try to attain more short termresources cr ratio = cr assetes/ cr debts, sice it s less than 1 so cr debts are more than cr assetes
Current ratio is a ratio and not a percentage. The intrepretation of the ratio might depend on the industry since the normal value for each industry may vary. Normally, it should be above1. Since, it indicates the company's position to pay off the debts using its current assets.