The current ratio is the measure of current assets to current liabilities. Basically, the higher the current ratio, the more debt that the company has incurred. The current assets are divided by current liabilities to calculate the current ratio. This indicates how liquid the company is, how much they have in current assets, including cash, accounts receivables, inventory, and other current assets ...
The solution discusses what high current ratios are and why businesses with high current ratios are at risk. This solution also explains what a high accounts receivable turnover indicates to a business.