Which of the following statements is incorrect?
A)It is possible for a profitable company to go out of business because of short-term liquidity problems.
B)If a company has a current ratio greater than 1, it will never go out of business because of liquidity problems.
C)The current ratio is always greater than or equal to the quick ratio.
D)The accuracy of a cash flow forecast is inversely related to the forecast horizon.

Question

Quizplus · Accepted Answer

While a current ratio greater than 1 is generally indicative of good liquidity, it does not guarantee that a company will never go out of business because of liquidity problems. Other factors such as poor management, economic downturns, or unexpected events can still impact a company's ability to meet its short-term obligations, even if its current ratio is strong.

Which of the Following Statements Is Incorrect