1.Briefly discuss whether an increase in the current ratio always represents an improvement for a business.

You are the auditor of motorway Ltd, a company trading in the motor industry. On examining the company's latest annual financial statements, you make the following observations The gross profit margin which had consistently been 30% over the past five years has dropped to 25% The current ratio, which in the past has always been at the same level as the industry average of 2:1 has increased to 4;1