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Hi John!
I do have watched your lectures but still has some issue with current ratio.
Could you explain why a high current ratio( for example 3:1 or 4:1) is not good for a company?
Because it means they are carrying (for example) more inventory than maybe they need to (and it may end up not getting sold) or they may have high receivables because they are giving customers too long a period to pay.
However there is no best level for the current ratio – it depends a lot on the type of business and so it really needs comparing to similar companies to be able to say whether the level is reasonable.
(Obviously it needs to be more than 1 otherwise the company has real liquidity problems)
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