alleryStart learning →A current ratio below one means current liabilities exceed:
AAnnual revenue
BTotal equity
CCurrent assets
DLong-term debt
Answer & Solution
Correct answer: C. Current assets
1. Read the ratio as a comparison of its two inputs.
2. The current ratio represents the current assets divided by current liabilities.
3. A ratio below one means the numerator is smaller than the denominator.
4. The numerator here is current assets.
5. So current liabilities exceed current assets.
_Source: OpenStax Principles of Finance (CC BY 4.0), Ch 6 'Measures of Financial Health'_
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