J. Doe runs a business. His current ratio is 0.71. His debts to asset ratio is...

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Accounting

J. Doe runs a business. His current ratio is 0.71. His debts toasset ratio is 0.38. His rate of return on equity is 2.5%. Heestimates he could earn 4% on investments off-farm. What is thefinancial situation on this farm?
Good liquidity, good solvency, profitable
Good liquidity, weak solvency, not profitable
Weak liquidity, good solvency, profitable,
Weak liquidity, good solvency, not profitable
Good liquidity, weak solvency, profitable
J. Doe runs a business. His current ratio is 2.1. His debts toasset ratio is 0.22. His rate of return on equity is 4.5% Heestimates he could earn 3% on investments off-farm What is thefinancial situation on this farm?
Good liquidity, good solvency, profitable
Weak liquidity, weak solvency, profitable
Weak liquidity, good solvency, profitable
Weak liquidity, good solvency, not profitable
Good liquidity, good solvency, not profitable

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4.1 Ratings (679 Votes)

1 Answer Option D Current ratio Current Assets Current Liabilities A current ratio of less than 1 means that the amount of current assets is less than current liabilities Hence it indicates that the company may have problems to meet its current liabilities which in turn indicates weak liquidity Debt to asset ratio Total See Answer

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Transcribed Image Text

J. Doe runs a business. His current ratio is 0.71. His debts toasset ratio is 0.38. His rate of return on equity is 2.5%. Heestimates he could earn 4% on investments off-farm. What is thefinancial situation on this farm?Good liquidity, good solvency, profitableGood liquidity, weak solvency, not profitableWeak liquidity, good solvency, profitable,Weak liquidity, good solvency, not profitableGood liquidity, weak solvency, profitableJ. Doe runs a business. His current ratio is 2.1. His debts toasset ratio is 0.22. His rate of return on equity is 4.5% Heestimates he could earn 3% on investments off-farm What is thefinancial situation on this farm?Good liquidity, good solvency, profitableWeak liquidity, weak solvency, profitableWeak liquidity, good solvency, profitableWeak liquidity, good solvency, not profitableGood liquidity, good solvency, not profitable