Question

in general, a firm _ to maintain a low current ratio because _ a. would, it...

in general, a firm _ to maintain a low current ratio because _ a. would, it can help the Total Asset Turnover increase b. would, it can help to increase the debt-to-equity ratio c. would not, it can decrease the Total Asset Turnover ratio d. would not, it can hurt the ability to pay off current liabilities

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Answer #1

Current ratio describe the relationship between current assets and current liabilities. It shows the ability o firm to utilise its current assets to pay the current liabilities. Higher the ratio, better it is because then the firm can easily utilise its current assets to pay current liabilities. A low cirrent ratio means that the firm does not have sufficient current assets to pay current liabilities

So correct answer is d) would not, it can hurt the ability to pay off current liabilities.

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