Is a high current ratio always a good indicator of a company's liquidity? Describe two situations in

Question:

Is a high current ratio always a good indicator of a company's liquidity? Describe two situations in which a high current ratio might be hiding liquidity problems.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Financial Accounting Tools for Business Decision Making

ISBN: 978-1118644942

6th Canadian edition

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine

See More Books

Question Posted: Jan 11, 2017 10:44 AM

See More Questions

Is it possible for a firm to have a high current ratio and still find difficulties in paying its current debt? Explain with illustration.
Multiple-Choice questions: a. A companys current ratio is 2.2 to 1 and quick (acid-test) ratio is 1.0 to 1 at the beginning of the year. At the end of the year, the company has a current ratio of 2.5...
Why might a company have a high current ratio but a low quick ratio (acid test ratio)?
The Seawall Corporation uses an injection molding machine to make a plastic product, Z39, after receiving firm orders from its customers. Seawall estimates that it will receive 50 orders for Z39...
You have been given the expected return data shown in the first table on three assets'F, G, and H'over the period 20132016. Using these assets, you have isolated the three investment alternatives...
Discuss: a. What are three examples where you have experienced people passing off opinions as facts in the workplace? b. How can you minimize other peoples bias when they do this? c. How can you...
In the short run, how can capacity be changed? LO.1
Alan Industries is expanding its product line to include three new products: A, B, and C. These are to be produced on the same production equipment, and the objective is to meet the demands for the...
Analysis of Adjusting Entry for Supplies Analyze each situation and indicate the correct dollar amount for the adjusting entry. (Trial balance is abbreviated as TB.) 1. Ending inventory of supplies...
In a pretest, data on Nike were obtained from 45 respondents. These data are given in the following table, which gives the usage, sex, awareness, attitude, preference, intention, and loyalty toward...
Explain the concept of sustainable income.
Identify for which liquidity ratios a lower result might be better, and explain why.
Repeat Problem 16.26 assuming a diffuser efficiency of 80%.
Identify whether the following statements are true or false: a. U.S. GAAP is universally accepted in all countries in the world. b. U.S. GAAP is established by the IASB. c. Once established, U.S....
Determine the missing amount in each of the following cases: Assets Liabilities $190,000 $62,000 ? $53,000 $115,000 ? Stockholders' Equity ? $31,000 $61,000
For the following four unrelated situations, A through D, calculate the unknown amounts appearing in each column: A B C Beginning Assets. $45,000 $32,000 $53,000 ? Liabilities.. 32,000 15,000 49,000...
On December 31, Greg Jones completed his first year as a financial planner. The following data are available from his accounting records: a. Compute Greg's net income for the year just ended using...
The Benson Company has collected the following production cost data: {Required:} What would be the incremental production costs for an additional 10 units after the Benson Company has produced 8...
Worldwide production of silicon carbide, SiC, is several hundred thousand tons annually. If you want to produce 1.0 10 5 metric tons of SiC, what mass (metric tons) of silicon sand (SiO 2 ) will you...
The following items were displayed in the statement of affairs for Lubbock Company: Fully secured liabilities ......... $90,000 Partially secured liabilities ....... 12,000 Unsecured liabilities...
The following information is available for Callaway Golf Company for the years 2006 and 2005. (Dollars are in thousands, except share information.) There were 69,111,349 shares outstanding at the end...
These financial statement items are for Barone Corporation at year-end, July 31, 2010. Salaries payable ............ $ 2,080 Salaries expense ............ 51,700 Utilities expense ............ 22,600...
Nordstrom, Inc. operates department stores in numerous states. Selected financial statement data (in millions of dollars) for the year ended February 3, 2007, follow. Instructions (a) Compute working...
A stock is expected to pay a dividend of $1.50 at the end of the year (i.e., D 1 = $1.50), and it should continue to grow at a constant rate of 10% a year. If its required return is 14%, what is the...
The Hobby Shop has a checking account with a ledger balance of $1,700. The firm has $2,400 in uncollected deposits and $4,200 in outstanding checks. What is the amount of the disbursement float on...
An investment will pay you $34,000 in 11 years. If the appropriate discount rate is 6.1 percent compounded daily, what is the present value? (Use 365 days a year. Do not round intermediate...

Is a high current ratio always a good indicator of a company's liquidity? Describe two situations in

Question:

Step by Step Answer:

A high current ratio is usually a good indicator of a compa...View the full answer

Financial Accounting Tools for Business Decision Making

Students also viewed these Managerial Accounting questions