Asked by Tara-lee Dübeaü on Jun 15, 2024
Verified
A higher current ratio is preferable for companies that do not have predictable cash flows.
Current Ratio
A liquidity ratio that measures a company's ability to pay short-term obligations using its current assets.
Cash Flows
The inflows and outflows of cash and cash equivalents for a company.
- Acquire knowledge of essential financial ratios applied in measuring liquidity, profitability, and leverage.
Verified Answer
DA
Damian ArambulaJun 18, 2024
Final Answer :
True
Explanation :
A higher current ratio means that a company has more current assets compared to its current liabilities, indicating that it has enough liquidity to pay off its short-term debts. This is beneficial for companies that do not have predictable cash flows because it provides a cushion against unexpected expenses or fluctuations in revenue.
Learning Objectives
- Acquire knowledge of essential financial ratios applied in measuring liquidity, profitability, and leverage.
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