alleryStart learning →A current ratio of two to one means current liabilities could be satisfied how many times?
ATwo times
BTen times
CSix times
DNine times
Answer & Solution
Correct answer: A. Two times
1. The ratio compares what is owned against what is owed.
2. A ratio of two to one means the assets are twice the liabilities.
3. If all the current assets became cash, the liabilities could be satisfied two times.
4. So the answer is twice over.
_Source: OpenStax Principles of Finance (CC BY 4.0), Ch 19 'The Importance of Trade Credit and Working Capital in Planning', sections 19.1-19.5_
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