A company is applying for a line of credit at a bank. The companys current ratio is

Question:

A company is applying for a at a bank. The company’s current ratio is 2 to 1. Although the bank felt that the company should be able to meet its short-term obligations, it stated that the current ratio was a concern. Discuss why a current ratio of 2 to 1 might indicate problems for the company.

Line of Credit
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...