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Discuss the pros and cons of the following: a) Company has current ratio of 2.5 and...

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Finance

Discuss the pros and cons of the following:

a) Company has current ratio of 2.5 and the industry average is3.2;

b) Company has current ratio of 4.5 and the industry average is3.2

Answer & Explanation Solved by verified expert
4.4 Ratings (707 Votes)
A current ratio is calculated by dividing the current assets of a company by its current liabilities Any asset is termed as current if it is to be converted into cash and cash equivalents within a period of 12 months An ideal current ratio is 2 1 This implies that the company can easily pay off its current obligations using the current assets However having a    See Answer
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