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ratios that measure a company's ability to pay off short term debt are _________. Bnb XRP aave Bonk coinbase futures litecoin futures cardano futures

Why is a company's current ratio higher than a quick ratio?

A company’s current ratio will often be higher than its quick ratio, as companies often use capital to invest in inventory or prepaid assets. The current ratio measures a company’s ability to pay current, or short-term, liabilities (debt and payables) with its current, or short-term, assets (cash, inventory, and receivables).

What happens if a company's current ratio is less than one?

If a company has a current ratio of less than one, it has fewer current assets than current liabilities. Creditors would consider the company a financial risk because it might not be able to easily pay down its short-term obligations.

How does a creditor evaluate a company's liquidity?

Creditors: Creditors, such as banks and financial institutions, rely on liquidity ratios to evaluate the creditworthiness of potential borrowers. By analyzing a company's liquidity position, creditors can assess the likelihood of timely repayment of loans or credit facilities.

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