If a company has a current ratio of 0.82, which of the following statements would be true?
A)The company is a serious credit risk and should not be lent money.
B)The company's current ratio is below the industry average.
C)The company's working capital cannot be calculated.
D)The company's working capital is negative.

Question

Quizplus · Accepted Answer

A current ratio of 0.82 indicates that the company may have difficulty meeting its short-term obligations. A ratio below 1 indicates that the company may not have enough current assets to cover its current liabilities. Therefore, the company will have negative working capital, which is the difference between current assets and current liabilities.

If a Company Has a Current Ratio of 0