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Anglo Corporation has a current ratio of 1.1:1. Jon has always been told that a corporations current

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Anglo Corporation has a current ratio of 1.1:1. Jon has always been told that a corporation’s current ratio should exceed 2.0:1. The company maintains that its ratio is low because it has a minimal amount of inventory on hand so as to reduce operating costs. Anglo also has significant available lines of credit. Is Jon still correct? What do some companies do to compensate for having fewer liquid assets?

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A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Jon is not correct In order to reduce costs many companies today keep low amounts of inventory on hand Consequently liquidity ratios are generally lower than they used to be Companies that keep fewer liquid assets on hand frequently rely on a bank line of credit A line of credit allows a company to borrow money on a shortterm basis to meet any cash shortfalls caused by a low amount ...View the full answer


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The current ratio is a financial ratio that measures a company\'s ability to pay its short-term obligations with its short-term assets. It is calculated by dividing a company\'s current assets by its current liabilities. The formula for calculating the current ratio is: Current Ratio = Current Assets / Current Liabilities Current assets are assets that can be converted to cash within one year, while current liabilities are debts that are due within one year. A current ratio of 1:1 or greater is generally considered good, as it indicates that a company has enough current assets to cover its current liabilities. A current ratio of less than 1:1 may suggest that a company may have difficulty meeting its short-term obligations. It\'s important to note that the current ratio is just one of many financial ratios that can be used to assess a company\'s financial health. It should be used in conjunction with other financial ratios and qualitative factors to make informed decisions about investing or lending to a company.

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