If the current ratio was 1.95 in 2012 and is 1.86 in 2013, how would managers interpret this change?
A) A current ratio of 1.95 is worse than a 1.86 ratio.
B) Both ratios are unacceptable because they are greater than 1.0.
C) A current ratio of 1.95 means that there is $1.95 of total assets for each dollar of liabilities.
D) The current ratio has worsened during the year, but it appears to be still acceptable.

Question

Quizplus · Accepted Answer

The current ratio measures a company's ability to pay short-term obligations with short-term assets. A decrease from 1.95 to 1.86 indicates a slight deterioration in liquidity, but both values above 1.0 suggest the company can still cover its short-term liabilities with its short-term assets, which is generally considered acceptable.

If the Current Ratio Was 1