Analysis of financial statements: current ratio Instructions: 1. Read the situation presented below and participate in the
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Analysis of financial statements: current ratio Instructions:
1. Read the situation presented below and participate in the forum by answering as requested.
- The ABX company requested a line of credit to finance the production operations of a new item. The bank denied the request because in its analysis of the financial statements the current ratio was less than 2.
2. Answer the following question:
- Why do you think the bank felt that the current rate of less than 2 was not appropriate? What other factors might be considered when evaluating a running rate of less than 2 as appropriate?
3. When developing your answer, explain what a company's current ratio measures and its importance for effective financial planning.
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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