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Explain Why a Creditor Would Be Concerned If Your Company

question 104

Essay

Explain why a creditor would be concerned if your company had a current ratio of less than 1.0?


Definitions:

Inventory

The goods and materials a business holds for the ultimate goal of resale or processing.

Current Ratio

A measure of how well a company can satisfy its short-term due debts, revealing its liquidity over the year.

Statement Of Financial Position

Another term for the balance sheet, a financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.

Common-Size Statement

A financial analysis tool that displays line items as a percentage of one selected or common figure, facilitating comparisons across different financial periods or companies.

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