A lower current ratio or acid-test ratio generally indicates a greater ability to pay current liabilities on a timely basis.

Question

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This statement is incorrect. A higher current ratio or acid-test ratio generally indicates a company has a larger amount of current assets relative to current liabilities, suggesting it may have a higher ability to meet short-term obligations. Conversely, a lower current ratio or acid-test ratio suggests the company may have difficulty meeting its obligations in the short-term.

A Lower Current Ratio or Acid-Test Ratio Generally Indicates a Greater