Why 2:1 is considered as ideal current ratio?
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Answer / prasanth p
If a company's current ratio is in the range 2:1, then it
is generally considered to have good short-term financial
strength. If current liabilities exceed current assets (the
current ratio is below 1), then the company may have
problems meeting its short-term obligations. If the current
ratio is too high, then the company may not be efficiently
using its current assets or its short-term financing
facilities.
| Is This Answer Correct ? | 35 Yes | 5 No |
Answer / shailendra srivastava
2:1 is current assets/current liabilities ratio of ideal
concern.
| Is This Answer Correct ? | 34 Yes | 6 No |
Answer / bhuvananatesh
2:1 is the ideal current ratio ,forget the golden
rule,there is no ideal ratio like that, it depends upon the
composition of current assets,if the firm conatains obsolte
stock or aged debtors in their current asses,2:1 is not the
ideal current ratio.
| Is This Answer Correct ? | 21 Yes | 12 No |
Answer / kushal jani
This is ideal because if a company has more current assets than current liabilities it can easily meet short term financial obligation.
it shows the company has maintained it's assets and liabilities according to the condition.
if the current ratio is below one then company has more current liabilities than current assets which shows company may face problems to meet the short term financial obligation.
If the company has too high current ratio, which shows company is not using it's assets effectively.
| Is This Answer Correct ? | 4 Yes | 1 No |
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