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a low current ratio in business indicates that the business is

Accounts - Principles of Accounts
WAEC 2013

a low current ratio in business indicates that the business is

  • A. long term loan repayment problem
  • B. efficient in the utilization of its resources
  • C. unable to pay its bills on time
  • D. growing its net assets effectively
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Correct Answer: Option C
Explanation

A low current ratio indicates problems in working capital management. All other things being equal, creditors consider a high current ratio to be better than a low current ratio, because a high current ratio means that the company is more likely to meet its liabilities which are due over the next 12 months.


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Post-UTME Past Questions - Original materials are available here - Download PDF for your school of choice + 1 year SMS alerts
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