Question

What is the current ratio preferred by banks while financing any working capital?

Q: Answer-What is the current ratio preferred by banks while financing any working capital?

Current ratio denotes the availability of liquid assets to meet short-term liabilities. Current ratio of 1.33 10075 means 75 of the current assets are funded through current liabilities including bankrsquos working capital loans and rest 25 is funded by the owner. A high current ratio like 1.8 or 3.00 in the options above is not desirable in most of the businesses it can be a sign of problems in managing working capital.