What is the target Current Ratio according to the material?

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Multiple Choice

What is the target Current Ratio according to the material?

Explanation:
The target Current Ratio reflects the level of short-term liquidity the company aims to maintain. Current ratio = current assets divided by current liabilities, so a target of 1.25:1 means there should be $1.25 of current assets for every $1 of current liabilities. This provides a modest liquidity cushion to cover short-term obligations without tying up excessive working capital. A 1:1 target would leave no cushion, 2:1 would be more cash-heavy and less efficient, and 0.8:1 would risk not meeting short-term obligations. So 1.25:1 is the balanced target.

The target Current Ratio reflects the level of short-term liquidity the company aims to maintain. Current ratio = current assets divided by current liabilities, so a target of 1.25:1 means there should be $1.25 of current assets for every $1 of current liabilities. This provides a modest liquidity cushion to cover short-term obligations without tying up excessive working capital. A 1:1 target would leave no cushion, 2:1 would be more cash-heavy and less efficient, and 0.8:1 would risk not meeting short-term obligations. So 1.25:1 is the balanced target.

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