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A current ratio higher than 1 implies ______ current assets than current liabilities? 1) less 2) equal 3) more 4) cannot be determined

User Golden
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Final Answer:

A current ratio higher than 1 implies more current assets than current liabilities. The answer is 3) more.

Step-by-step explanation:

A current ratio higher than 1 implies more current assets than current liabilities. The answer is 3) more.

The current ratio is calculated by dividing current assets by current liabilities. A ratio higher than 1 indicates that the entity has more current assets available to cover its short-term obligations. This is generally seen as a positive financial indicator, suggesting a healthy liquidity position and the ability to meet short-term financial commitments.

A current ratio of exactly 1 would mean that current assets are equal to current liabilities, while a ratio less than 1 would suggest that current liabilities exceed current assets, potentially raising concerns about the organization's ability to cover its short-term obligations.

In summary, a current ratio higher than 1 signifies that there are more current assets available to cover current liabilities, indicating a stronger financial position in the short term.

User Sampathsris
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