From a liquidity standpoint it is more desirable for a company to have current
A) assets equal current liabilities.
B) liabilities exceed current assets.
C) assets exceed current liabilities.
D) liabilities exceed long-term liabilities.

Question

Quizplus · Accepted Answer

Current assets exceeding current liabilities indicates that a company has enough short-term assets to cover its short-term liabilities. This is a positive sign from a liquidity perspective as it suggests that the company can meet its immediate financial obligations without relying on external sources of funding. Option A is also acceptable; however, having a higher amount of current assets than current liabilities is a more desirable scenario than just breaking even. Option B and D are both unfavorable as they suggest that a company may struggle to meet its short-term obligations and may require additional financing.

From a Liquidity Standpoint It Is More Desirable for a Company