Resolved: current ratio under 2 is good or bad
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Accounting and Financial Statement Analysis
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Practical Exercise Analyzing P&G's Business Through Financial Ratios (1 of 2)
should current ratio be more than 2 in order to conclude that it is good , why instructor told p&g current ratio is good even it is under 1
1 answers ( 0 marked as helpful)
Hi,
a current ratio of 2 indicates that the company has $2 of current assets for every $1 of current liabilities.
Whether this is good or bad depends on the specific company and industry.
For example, if most competitors have a current ratio of 0.1 and ours is 0.7, then this is an indicator of a better liquidity position.
We need to have a proper benchmark in order to say whether a certain ratio is good or bad.
I hope this answers your question.
Best,
The 365 Team