A current ratio of less than 1.0 means that current assets exceed current liabilities.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. If the resulting ratio is less than 1.0, it means current liabilities exceed current assets, indicating that the company may face difficulty meeting its short-term obligations. If the current ratio is greater than 1.0, it means current assets exceed current liabilities, which is considered a positive sign of financial health.

A Current Ratio of Less Than 1