Asked by MUHAMMAD OSAMA on Jun 08, 2024
Verified
A very high current ratio and a low quick ratio may indicate the company is not collecting its accounts receivable in a timely manner.
Current Ratio
The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with current assets.
Quick Ratio
A measure of a company's ability to meet its short-term obligations using its most liquid assets, excluding inventory.
Accounts Receivable
Open accounts owed to the business by trade customers.
- Understand how different financial ratios and their components indicate a company's financial health.
Verified Answer
AG
Amteg GondaraJun 11, 2024
Final Answer :
False
Explanation :
A very high current ratio and a low quick ratio suggest that the company has a large proportion of inventory in its current assets, not necessarily issues with collecting accounts receivable.
Learning Objectives
- Understand how different financial ratios and their components indicate a company's financial health.