A firm's current ratio has steadily increased over the past 5 years, from 1.9 five years ago to 3.8 today.What would a financial analyst be most justified in concluding?

Question

Quizplus · Accepted Answer

The current ratio measures a company's ability to pay its short-term liabilities with its current assets. A higher current ratio indicates that the company has more current assets relative to its current liabilities, which means its liquidity position has improved. The increase in current ratio does not necessarily indicate anything about the fixed assets turnover or the share price.

A Firm's Current Ratio Has Steadily Increased Over the Past