1.20 r c. 1.44 c d-4.40 1 points QUESTION 10 Which of the following is a correct

Question

1.20 r c. 1.44 c d-4.40 1 points QUESTION 10 Which of the following is a correct statement? (LO 6, LO 7) 1. a Liquidity is the ability to repay liabilities in the long run. D.Solvency describes the ability to generate sufficient short-term cash flows to pay obligations as they become due. C C A low current ratio suggests that the company having difficulty paying its short-term obligations. An operating cycle is defined as the average time it takes a business to convert inventory to accounts receivable. d.

Explanation / Answer

Correct answer is c. A low current ratio suggests that the company having difficulty paying its short term obligations.

Current ratio is the ratio of current assets and current liabilities which indicates the working capital efficiency of the company. A low current ratio indicates that the company is having current assets which may not be sufficient to pay current liabilities comfortably.

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