Question

A firm's current ratio has steadily increased over the past 5 years, from 1.9 five years ago to 3.8 today. What would a financial analyst be most justified in concluding?a. The firm's fixed assets turnover probably has improved.b. The firm's liquidity position probably has improved.c. The firm's stock price probably has increased.d. Each of the above is likely to have occurred.e. The analyst would be unable to draw any conclusions from this information.

Answer 1

The financial analyst would be more justified in concluding the firm's liquidity position most probably has improved.

Step-by-step explanation:

The current ratio is the which is used to measure or evaluate the firm short- term liquidity position and it provides a relationship among the CA (Current Assets) and CL (Current Liabilities).

As the Current ratio is 3.8 today, which is good for the firm as they have the ability to meet up its short- term obligations. Which in turn concludes that the firm liquidity position is improving.