A high current ratio does not always indicate that a company has a strong liquidity position. Explain

Question:

A high current ratio does not always indicate that a company has a strong liquidity position. Explain why this may be the case.

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

Step by Step Answer:

Related Book For book-img-for-question

Accounting Principles Volume 2

ISBN: 9781119786634

9th Canadian Edition

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak

See More Books

Question Posted: Jan 30, 2023 05:33 AM

See More Questions

A high current ratio does not always indicate that a company has a strong liquidity position. Describe two situations that might result in the current ratio appearing to be "artificially" high?
Why might a company have a high current ratio but a low quick ratio (acid test ratio)?
Explain how a company with a high current ratio may not be as liquid as the ratio seems to indicate.
Write a Digraph client TransitiveClosure whose constructor takes a Digraph as an argument and whose method isReachable (v, w) returns true if there exists some directed path from $v$ to $w$, and...
White Water Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 2015, White Water incorrectly counted its inventory as...
Explain the importance of ethical behavior for managers and accountants.
1. Explain how long-term price-to-earnings (P/E) ratios in the U.S. stockmarket of around 15 times are consistentwith long-term expected stock returns of around 6 to 7 percent a year in real terms.
Sabina Company had the following two transactions related to its delivery truck. 1. Paid $38 for an oil change. 2. Paid $400 to install special shelving units, which increase the operating efficiency...
The Filzinger Corporations December 31, 2018 year-end trial balance contained the following income statement items: Account Title Debits Credits Sales revenue 6,950,000 Interest revenue 80,000 Gain...
Benjamin used regression analysis to fit quadratic relations to monthly revenue and cost data with the following results: R = 0.007 Q2 + 32 Q TC = 0.004 Q2 + 2.2 Q + 8 (a) Plot R and TC. Estimate...
Presented here are an incomplete income statement and balance sheet for Schwenke Corporation. Additional information: 1. The gross profit margin is 40%. 2. The income tax rate is 20%. 3. The...
For each of the following liquidity ratios, indicate whether the change would be viewed as an improvement or deterioration: a. A decrease in the receivables turnover b. A decrease in the collection...
Enter the following transactions in the books of 'Mary Ward' for December (use T accounts). 1 Dec Introduced a motor vehicle to the new business worth 8,000 1 Dec Transferred a computer from home to...
You have recently taken over daycare center that was under substandard leadership. Currently, the staff is unmotivated, negative, and often absent from work. You notice that there is minimal...
Choose an organization from the industry of your choice to discuss, illustrate, and reflect deliberately on the following: Why is it important to distinguish between "group" and "team "? What kinds...
The focus of data governance programs, in some capacity, is enterprise-wide data quality standards and processes. If you were a manager focusing on master data: Would you likely meet enterprise-level...
1) Identify and explain each component of the ANOVA model. 2) How is the F ratio obtained? 3) What role does the F ratio play?
Make a BCG matrix table and place the following products from Apple: iPhone, iPad, iMac, iPod, Apple TV, Apple Watch, AirPod, and HomePod. Briefly describe why you have placed the products in the...
Consider the following letter and answer Shadys question. To my friendly student tax preparer: Hello, my name is Shady Slim. I understand you are going to help me figure out my gross income for the...
Why should you not model a decision variable as a random variable with a probability distribution?
Sugden Company has a December 31 fiscal year end and follows IFRS. The following selected transactions are related to its property, plant, and equipment in 2024: Jan. 22 Performed an annual safety...
Glans Company purchased equipment on account on April 6, 2022, at an invoice price of $442,000. On April 7, 2022, it paid $4,000 for delivery of the equipment. A one-year, $3,000 insurance policy on...
In its first year of business, Solinger Company purchased land, a building, and equipment on November 5, 2023, for $700,000 in total. The land was valued at $262,500, the building at $337,500, and...
thumbs up if correct A stock paying no dividends is priced at $154. Over the next 3-months you expect the stock torpeither be up 10% or down 10%. The risk-free rate is 1% per annum compounded...
Question 17 2 pts Activities between affiliated entities, such as a company and its management, must be disclosed in the financial statements of a corporation as O significant relationships O segment...
Marchetti Company, a U.S.-based importer of wines and spirits, placed an order with a French supplier for 1,000 cases of wine at a price of 200 euros per case. The total purchase price is 200,000...

A high current ratio does not always indicate that a company has a strong liquidity position. Explain

Question:

Step by Step Answer:

A high current ratio might be hiding liquidity prob...View the full answer

Accounting Principles Volume 2

Students also viewed these Business questions