Analysing the changes from the end of 20 × 5 to the end of 20 × 6,which of the following statements is correct about the protection provided to creditors by the company's financial position?
A) Creditors would see no change in the level of protection.
B) Creditors would see increased protection.
C) Creditors would see decreased protection.
D) There is insufficient information to attempt to answer this question.

Question

Quizplus · Accepted Answer

The current ratio has increased from 1.2 to 1.5, indicating that the company has more current assets relative to its current liabilities. This means that the company is better able to meet its short-term obligations and creditors would see increased protection.

Analysing the Changes from the End of 20 × 5