The following balances were taken from the company's records:

-Refer to Bass Tours. If the average current ratio for similar companies is 2.0 to 1, what does this tell you about this company's liquidity?

Question

The following balances were taken from the company's records:
 
-Refer to Bass Tours. If the average current ratio for similar companies is 2.0 to 1, what does this tell you about this company's liquidity?

Quizplus · Accepted Answer

The current ratio is a measure of a company's ability to pay its short-term debts with its current assets. An average current ratio of 2.0 to 1 indicates that a company is considered to have good liquidity. Since Bass Tours' current ratio is higher than the average, it suggests that the company is more liquid than its competitors, and therefore in a better position to meet its short-term obligations.

The Following Balances Were Taken from the Company's Records