Question

A current ratio of 6.0 is usually an indication that the firm:

1) has a low degree of liquidity.
2) has a reasonable degree of liquidity.
3) has not made the most productive use of its assets.
4) has made the most productive use of its assets.

Answer 1

A current ratio of 6.0 is usually an indication that the firm has a reasonable degree of liquidity.

Step-by-step explanation:

A current ratio of 6.0 is usually an indication that the firm has a reasonable degree of liquidity. The current ratio is a measure of a company's ability to pay off its short-term liabilities using its short-term assets. A current ratio of 6.0 means that the company has six times more current assets than current liabilities, which indicates a good level of liquidity. It suggests that the company has enough assets that can be easily converted into cash to cover its short-term debts.