A sugar cane processing company in Guyana has a quick ratio of 0.6:1. This indicates that the company:

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Question

A sugar cane processing company in Guyana has a quick ratio of 0.6:1. This indicates that the company:

Accepted Answer

May have difficulty paying its short-term debts as they fall due — Award 1 mark for recognising that a quick ratio below 1:1 indicates potential liquidity problems. B is incorrect — the ratio is below the acceptable benchmark. C is incorrect — increasing inventory would not improve the quick ratio. D is incorrect — the quick ratio measures liquidity, not profitability.

Answer

Has excellent liquidity and can easily meet all obligations

Answer

Should increase its inventory levels immediately

Answer

Is making a high return on capital employed

Answer

May have difficulty paying its short-term debts as they fall due

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