Which of the following, if true, strengthens the case that Matheson's current ratio will be above the standard of 2.0?
A) Matheson's current liabilities are low.
B) Matheson has a large amount of cash on hand.
C) Matheson's current receivables are high.
D) Matheson's current assets are low.
E) Matheson's owners' equity is high.
Answer: A
Explanation: A) Current liabilities appears in the denominator of the current ratio, so low current liabilities would contribute to a high current ratio. Low current assets, Choice D, tends to weaken the case for a current ratio above 2.0. The factors cited in Choices B, C, and E are not considered in the current ratio.
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Which is the appropriate time constraint for this scenario?
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