A low cash realization ratio may reveal liquidity problems in a profitable company.

Question

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The cash realization ratio measures how quickly a company can convert its sales into cash. If the ratio is low, it indicates that the company's customers are slow to pay their bills, which can create a liquidity problem even if the company is profitable. This is because the company may not have enough cash on hand to cover its expenses or invest in new opportunities. Therefore, a low cash realization ratio can reveal liquidity problems in a profitable company.

A Low Cash Realization Ratio May Reveal Liquidity Problems in a Profitable