based upon the current ratio, how would creditors or lenders feel about the liquidity of the buisness? why?

Question

Remington Simmons

Business

12 April, 08:14

based upon the current ratio, how would creditors or lenders feel about the liquidity of the buisness? why?

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Sergio Tyler · Answer 1

Current ration is a measurement that measures how many current assets are there to cover up the current liabilities. the ratio represent the firm's ability to meet the day to day, short term obligations.

it is calculated as follows,

Quick Ratio/Current asset ratio=Current Assets/Current Liabilities

a normal, health current asset ratio is 1. and it is better when the number is going up.

This gives the short term lenders (such as short term bond holders) and suppliers the ability to assess the companies ability to pay off the short term obligations in an even of bankruptcy or finanacial crisis.