As the ratio of current assets to total assets increases, the firm's risk increases.

Question

Quizplus · Accepted Answer

The statement is false. A higher ratio of current assets to total assets indicates that the firm has more liquidity, which reduces its risk. It means that the firm has a better ability to meet its short-term obligations, including paying its bills and debts, which enhances its financial stability. Therefore, a higher ratio of current assets to total assets actually decreases the firm's risk.

As the Ratio of Current Assets to Total Assets Increases