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Despite the fact that the current ratio and liquidity ratio of a company are within accepted...

Despite the fact that the current ratio and liquidity ratio of a company are within accepted standards, if the company is unable to pay the checks, explain on the example of where the problem is caused.
(Cash Rate Formula can be used for the answer to this question).

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Answer #1

Despite the fact that the current ratio and liquidity ratio of a company are within accepted standards, if the company is unable to pay the checks then it may be happen due to non mainataince of cash ratio.

Cash ratio can be calculated by dividing the cash & cash equivalents with current liabilities.

Cash ratio helps the company to maintain the standard towards management of cash & cash equivalents instead of current ratio & liquidity ration as they provide the details for short term liquidity position.

Company should mantain the cash & cash equivalents so that cheque will be paid on time.

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