Business FinancesQuestion 1143 of 1605
A contractor's current ratio is 0.8 to 1. This most likely indicates:
a.Excellent liquidity
b.He owes no short-term debt
c.Current liabilities exceed current assets, signaling possible liquidity problems
d.The business is highly profitable
Explanation
A current ratio below 1.0 means current liabilities exceed current assets, so the company may struggle to pay short-term obligations as they come due. Lenders and sureties view a sub-1.0 ratio as a warning sign.
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Sen Lin, PrepPass Founder · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)