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WAEC Financial Accounting 2013 Question 28

Question 28

Interpretation of Accounts

A low current ratio in a business indicates that the business is

  1. A.faced with long term loan repayment problem.
  2. B.efficient in the utilization of its resources.
  3. C.unable to pay its bills on time.
  4. D.growing its net asset effectively.
Show the answer and explanation

Answer: C (unable to pay its bills on time.)

Explanation

A low current ratio means current assets are small compared with short-term debts, so the business may struggle to pay its bills.