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      Question

      A significantly high current ratio (e.g., >3.0) in a

      company’s balance sheet might indicate:
      A Strong and efficient use of working capital Correct Answer Incorrect Answer
      B Potential underutilization of resources and poor asset management Correct Answer Incorrect Answer
      C Higher profitability margins Correct Answer Incorrect Answer
      D Adequate debt servicing capacity Correct Answer Incorrect Answer
      E Imminent risk of insolvency Correct Answer Incorrect Answer

      Solution

      Excess current assets relative to liabilities can indicate inefficient working capital utilization.

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