Current Ratio Less Than 1

A current ratio of less than 1 indicates that the company may have problems meeting its short-term obligations. Current ratio ought to be less than 1.

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A current ratio of less than 1 indicates that the company may have problems meeting its short-term obligations.

. - a Current Liabilities Current Assets - b Fixed Assets Current Assets - c Current Assets Current Liabilities - d Share. The higher ratio the higher. If current liabilities exceed current assets the current ratio will be less than 1.

Solved Answer of MCQ A Current Ratio of Less than One means. Some types of businesses can operate with a current ratio of less than one. For instance if the current ratio is less than 1 this means that the companys outstanding debts owed within a year are higher than the current assets the company holds.

In airline business equity to assets ratio is also very low as airlines leverage. More debts due within the next year than assets that should. A good liquidity ratio is anything greater than 1.

A firm having a current ratio less than 10 has. However you should remember that a higher current ratio. The current ratio is used to evaluate a companys ability to pay its short-term obligationsthose that come due within a year.

The current ratio helps in analyzing the capability of an organization in discharging its current financial obligations whereas the quick ratio helps in analyzing the capability of an. A ratio of 1 means that a company can exactly pay off all its. Given the structure of the ratio with assets on top and liabilities on the bottom ratios above 10 are sought after.

Correct option is C Current ratio is the measure of liquidity of a company at the certain date. A high current ratio can be signs of problems in managing working capital. When current ratio is.

Hence with low current assets and higher current liabilities. A current ratio less than 10 means that current liabilities exceed current assets. By contrast a current ratio of less than 1 may indicate that your business has liquidity problems and may not be financially stable.

The current ratio is calculated by dividing a. It indicates that the company is in good financial health and is less likely to face financial hardships.

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