In comparing the current ratios of two companies,why is it invalid to assume that the company with the higher current ratio is the better company?
A) The two companies may be different sizes.
B) A high current ratio may indicate inadequate inventory on hand.
C) The two companies may define working capital in different terms.
D) A high current ratio may indicate inefficient use of various assets and liabilities.

Question

Quizplus · Accepted Answer

A high current ratio may indicate inefficient use of assets and liabilities, as it could suggest that the company is not effectively utilizing its resources to generate revenue.

In Comparing the Current Ratios of Two Companies,why Is It