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QUESTION

A company with current assets of $44,400 and current liabilities of $29,000 has a current ratio of 1.53 to 1. This means that the company has $1.

A company with current assets of $44,400 and current liabilities of $29,000 has a current ratio of 1.53 to 1. This means that the company has $1.53 of current assets for every dollar that has to be paid to a creditor in the short term. In the short term, then, it appears that the company can meet its debts. If the ratio is less than 1 (for example .80 to 1) the company might have to sell its long-term assets to meet its current debts. Would a ratio of 10 to 1 be good?

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