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 2, 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 2 implies strong liquidity, it does not guarantee that the company will never face liquidity problems. Other factors such as sudden unexpected events, poor financial management, and economic conditions can still lead to liquidity issues.

Which of the Following Statements Is Incorrect