Accounting · Financial Ratio Analysis
A company's current ratio is 2:1, but its quick ratio (acid-test ratio) is 0.8:1. What does this gap primarily indicate about the company's financial state?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The company possesses strong, highly liquid cash assets overall
- 2The company holds a high level of inventory relative to its total current assets✓
- 3The company has insufficient current liabilities on its balance sheet
- 4The company has significantly under-valued its accounts receivables
Correct answer
The company holds a high level of inventory relative to its total current assets
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