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Ratios: Working Capital and the Current Ratio
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Ratios: Working Capital and the Current Ratio
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14. Financial Statement Analysis / Ratios: Working Capital and the Current Ratio / Problem 2
Problem 2
A company has a current ratio of 1.5 and positive working capital. What does this indicate about its ability to cover current liabilities?
A
The company has excess cash for investments.
B
The company is in a strong position to cover its liabilities.
C
The company has a low current ratio.
D
The company may struggle to cover its current liabilities and face liquidity issues.
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