Access Motley Fools discussion of the current ratio at Fool.com (search that site for the current ratio.)
Question:
Required
1. What level for the current ratio is generally regarded as sufficient to meet near-term operating needs?
2. Once you have calculated the current ratio for a company, what should you compare it against?
3. What are the implications for a company that has a current ratio that is too high?
Step by Step Answer:
1 The Motley Fool states that a benchmark of 15 is gener...View the full answer
Fundamental Accounting Principles
ISBN: 978-0078110870
20th Edition
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta
Related Video
The current ratio is a financial ratio that measures a company\'s ability to pay its short-term obligations with its short-term assets. It is calculated by dividing a company\'s current assets by its current liabilities. The formula for calculating the current ratio is: Current Ratio = Current Assets / Current Liabilities Current assets are assets that can be converted to cash within one year, while current liabilities are debts that are due within one year. A current ratio of 1:1 or greater is generally considered good, as it indicates that a company has enough current assets to cover its current liabilities. A current ratio of less than 1:1 may suggest that a company may have difficulty meeting its short-term obligations. It\'s important to note that the current ratio is just one of many financial ratios that can be used to assess a company\'s financial health. It should be used in conjunction with other financial ratios and qualitative factors to make informed decisions about investing or lending to a company.
Students also viewed these Accounting questions
-
What is the major limitation of the current ratio as a measure of a firms liquidity? How may this limitation be overcome?
-
What is the appropriate use of the current ratio as a measure of liquidity?
-
What are the limitations of the current ratio as a measure of liquidity?
-
Apply Theorem 3 to calculate the matrix exponential e At for each of the matrices in Problems 35 through 40. A = 13 3 3 3 01 3 3 00 23 0002
-
A heavy construction firm has been awarded a contract to build a large concrete dam. It is expected that a total of 8 years will be required to complete the work. The firm will buy $600,000 worth of...
-
For what type of actions can clients bring suit against auditors under common law? What must clients prove prior to bringing suit in each case?
-
If the probability is 0.40 that steam will condense in a thin-walled aluminum tube at 10 atm pressure, use the formula for the binomial distribution to find the probability that, under the stated...
-
1. What are the ethical issues in this case? 2. What are some reasons the decision maker in this case might be inclined to go along? Not go along? 3. If you were the decision maker, how would you...
-
Discuss the implications of the efficient market hypothesis on the effectiveness of technical and fundamental analysis in stock valuation.
-
Use the computer output for the radial keratotomy data of Problem 12 in Chapter 8, along with the additional output here, to answer the following questions. a. Perform the overall F test for the...
-
Assume that one of your classmates states that a companys books should be ongoing and therefore not closed until that business is terminated. Write a half-page memo to this classmate explaining the...
-
The unadjusted trial balance and information for the accounting adjustments of Noseworthy Investigators follow. Each team member involved in this project is to assume one of the four responsibilities...
-
If a parallelogram fits inside a circle radius 1 and det A = 4, where A is the matrix whose columns correspond to the edges of the parallelogram, does it seem like A and its determinant have been...
-
Which of the following are not true about data associations? a. They are modeled as a dotted arrow. b. The association arrowhead shows the direction of data flow. c. They connect data objects to...
-
The chapter notes that between 1990 and 2019, the number of people employed at newspapers declined from 450,000 to fewer than 140,000. Some of this decline was the result of newspapers in small towns...
-
Which of the following is an agent in a purchases and payments structure model? a. Employee labor b. Receipt of goods c. Cash disbursement d. Inventory e. Supplier
-
Which of the following is not a role of the accounting function in business? a. Financial close b. Regulatory compliance c. Project management d. Using IT to make finance and accounting processes...
-
How do you implement a one-to-many relationship in a relational database? a. Post a foreign key. b. Create a new table. c. Combine two fields to create a primary key. d. Create an association. e....
-
Describe the GLOBE projects dimensions of national culture.
-
Explain the operation of the dividends received deduction.
-
Whether youre graduating this year or a few years from now, you may want to join a local alumni organization. Write an email to the head of the alumni association in the area you might live. Include...
-
Micelli Company has an opportunity to invest in one of two projects. Project A requires a $480,000 investment for new machinery with a three-year life and no salvage value . Project B also requires a...
-
Cologne Corporation is considering a new project requiring a $25,000 investment in an asset having no salvage value . The project would produce $15,000 of pretax income before depreciation at the end...
-
Windtrax Company manufactures and sells to local wholesalers approximately 200,000 units per month at a sales price of $1 per unit. Monthly costs for the production and sale of this quantity follow....
-
2 If tan 08, sin 0 <0, find the exact value of each of the following for 00 <2x (a) sin (20) 0 (b) cos (20) (c) sin 2 (d) cos 2 (a) sin (20)= (Type an exact answer, using radicals as needed.) (b) cos...
-
Suppose you invest 52%, 28%, and 20% of your wealth into a stock, the market, and a risk-free asset, respectively. The beta of the stock is 1.1. What is the beta of the portfolio?
-
An investment of $21745, earning compound interest, grows by $2278 in one year. At this rate of growth, how long will it take for the original investment to double?
Study smarter with the SolutionInn App