A weakness of the current ratio is
A) the dificulty of the calculation.
B) that it doesn't take the composition of the current assets into account.
C) that it is rarely used by sophisticated analysts.
D) that it can be expressed as a percentage, as a rate, or as a proportion.

Question

Quizplus · Accepted Answer

The current ratio, which compares a company's current assets to its current liabilities, does not consider the composition of the current assets. This means it treats all current assets as equally liquid, which is not always the case. For example, inventory may not be as easily converted to cash as marketable securities.

A Weakness of the Current Ratio Is