Question

when analyzing a companys current ratio: a. a current ratio of less than 1.00 means that current liabilities exceed current assets. b. most successful businesses operate with current ratios between 0.1 and 0.5. c. the current ratio measures the companys ability to pay all liabilities (current and long - term) with current assets. d. the industry in which the company operates should not be considered.

Explanation:

• Option A: The formula for the current ratio is $\text{Current Ratio}=\frac{\text{Current Assets}}{\text{Current Liabilities}}$. If the current ratio is less than 1.00, then $\text{Current Assets}<\text{Current Liabilities}$.
• Option B: A current ratio between 0.1 - 0.5 is very low. Most successful businesses have a current ratio of at least 1.0 (and often higher, depending on the industry), as it indicates the ability to cover short - term obligations.
• Option C: The current ratio only measures the ability to pay current liabilities with current assets. Long - term liabilities are not considered in the current ratio calculation.
• Option D: The industry is an important consideration. Different industries have different working capital requirements. For example, a service - based industry may have a different optimal current ratio range compared to a manufacturing industry.

Answer:

A. a current ratio of less than 1.00 means that current liabilities exceed current assets.