Asked by Hunter Thomason on May 26, 2024

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A company with a high current ratio should never have liquidity problems.

Liquidity Problems

Situations where an entity faces difficulty in converting assets into cash or meeting its short-term obligations.

  • Understand the concept of liquidity and the limitations of liquidity ratios.
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OO
oluwanifemi oluwagbemilaMay 29, 2024
Final Answer :
False
Explanation :
A high current ratio indicates a company has enough current assets to cover its current liabilities. However, it does not necessarily mean the company will not have liquidity problems. The company may still face cash flow issues if a significant portion of its current assets are tied up in inventory, for example, or if it has large unpaid bills to cover. Other factors such as market conditions, mismanagement, or unexpected expenses can also impact a company's liquidity.