Question: If you know a company has a current ratio of 2 to 1, why is that not enough information to judge its liquidity?

If you know a company has a current ratio of 2 to 1, why is that not enough information to judge its liquidity?

Step by Step Solution

★★★★★

3.31 Rating (160 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

The current ratio is the ratio of a companys current ass... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

423-B-A-F-A (2131).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

Q:

A company has a current ratio of 1.25 but an acid-test (or quick) ratio of only 0.65. How can this difference in the two ratios be explained? What concerns might you have about this company?

Q:

A company has a current ratio of 3 to 1 but would like to decrease the ratio. What types of options does it have to accomplish this?

Q:

Greene Company has a current ratio of 2:1 on June 30, 2014. Indicate whether each of the following transactions would increase (+), decrease (), or not affect (NA) Greenes current ratio and its...

Q:

1. Which of the following should not be included as an application of the rate of return concept? a. rate of return measures the overall profitability of the comeny b. rate of return can be used in...

Q:

18. Which financial ratio is designed to determine how well a business can pay its short-term obligations? A. Profitability ratio B. Activity ratio C. Obligation ratio D. Liquidity ratio E. Debit...

Q:

Hello please refer to part 4 from the question paper I have attached the past student work for your reference just have to follow the format if you feel comfortable with I have attached the necessary...

Q:

Hello please refer to part 4 from the question paper I have attached the past student work for your reference just have to follow the format if you feel comfortable with I have attached the necessary...

Q:

Hello please refer to part 4 from the question paper I have attached the past student work for your reference just have to follow the format if you feel comfortable with I have attached the necessary...

Q:

Complete Review Questions 1-10 at the end of "HospitalityIndustry Managerial Accounting," Ch. 5. 5Ratio AnalysisChapter 5 Outline Ratio Standards Purposes of Ratio Analysis What Ratios Express...

Q:

Managerial Accounting - 6th Edition by James Jiambalvo Chapter 14 - Problems 13, 14, and 15 (see attachment) Problem 14-13. Common-Size Financial Statements (p.564) Problem 14-14. Horizontal Analysis...

Q:

Would you vote to approve any additional items if the unexpected surplus were $3 billion instead of $1 billion?

Q:

Social media has been shown to play an important role in business to consumer markets, and now is being used for assisting personal selling effort in business to business markets. Explain how...

Q:

The domain of g ( x ) is the interval - 3 , 7 . g ( 0 ) = 4 g ( 2 ) = 0 - 3 - 1 g ( x ) d x = 6 - 3 0 g ( x ) d x = - 2 0 4 g ( x ) d x = 8 2 4 g ( x ) d x = - 3 2 7 g ( x ) d x = 1 0 Now calculate...

Q:

8. The University of Manchester Press is wholly owned by the university. It performs the bulk of its work for other universit Requirement 2. Prepare journal entries to summarize the 2017...

Q:

Calbear Co. acquired 100% of Stanford Co. on January 1, 2020. Stanford uses the equity method for accounting for its investment in Stanford. The individual company information for Calbear Co. and...

Q:

Velvet Construction Limited is a company with a 30 June year-end and is involved in the construction industry. The company has the following lease agreements on its books: Lease agreement 1:...

Q:

1) Air at 1 atm and 15C with a mass flow rate at 0.15 kg/s flows through a long rectangular duct 7.5 cm by 15 cm. A section of the duct is maintained at 120C, and the average air temperature at exit...

Q:

17-10. How are forward-market and the money-market hedges used? What are the major differences between these two types of hedges?

Q:

What is the difference between a subsidiary account and a control account?

Q:

Why are control account balances reported in external financial statements while subsidiary account balances are not? Are subsidiary account balances useful to anyone? Who?

Q:

The textbook lists depreciation as an example of a period cost that often must be updated in the accounting records at the end of a fiscal period. What other examples of period costs that must be...

Q:

An investment offers $4,090 year per forever, with the first payment occurring one year from now. If the required return is 10.4%, what is the value of the investment? (Round your final answer to two...

Q:

a-1. If your portfolio is invested 25 percent each in A and B and 50 percent in C, what is the portfolio expected return? (Do not round intermediate calculations and enter your answer as a percent...

Q:

15. A $100,000 par value T-bond futures contract trades at $98,700. T-bond rates increase by 100 basis points from 7.0% to 8.0%. The T-bond has a duration of 9 years. What is the change in the value...