A company's current ratio changed from 1.4 times in the previous year to 1.6 times this year. Concluding that the company's liquidity improved is ___________.

Question

Quizplus · Accepted Answer

The current ratio is a measure of a company's ability to pay its current liabilities with its current assets. A higher current ratio indicates that the company has more current assets relative to its current liabilities, which means it is better able to cover its short-term obligations. Therefore, a change from 1.4 times to 1.6 times suggests an improvement in the company's liquidity position, and the statement is true.

A Company's Current Ratio Changed from 1