Historically, it was thought that the current ratio should be ________, but more recently, many firms that are financially strong operate with current ratios of ________.
A) at least 10:1; less than 5:0
B) more than 7:1; 2.0
C) less than 5:1; more than 10:1
D) 2:1; less than 2:1
E) 3:1; less than 5:1

Question

Quizplus · Accepted Answer

Historically, it was believed that a current ratio of 2:1 was a good indicator of financial health, indicating that a company had twice as many current assets as current liabilities. However, in more recent times, many financially strong companies operate successfully with current ratios of less than 2:1, reflecting more efficient asset management or different industry standards.

Historically, It Was Thought That the Current Ratio Should Be