What is the ideal current ratio for a company?

The ideal current ratio for a company is considered to be at least 2-to-1, as this indicates that the company has twice as many current assets as current liabilities. This level of liquidity suggests that the company is in a strong position to cover its short-term obligations, which is an essential factor for financial health and stability. A current ratio of 2-to-1 typically reassures creditors and investors that the company can meet its immediate liabilities without undue strain on its cash flow.

Furthermore, a higher current ratio can also provide a buffer against potential downturns or unexpected expenses, as it reflects a more conservative financial position with greater asset reserves relative to liabilities. This is particularly important for companies operating in industries with high volatility or those that may face sudden changes in cash flow.

Other options suggest lower ideal current ratios, which may not provide adequate assurance regarding a company's short-term financial stability. A current ratio of less than 1-to-1 indicates that a company does not have enough assets to cover its liabilities, which could pose a risk of insolvency in the near term. A ratio of exactly 1-to-1 is better than less than 1, but it still does not suggest strong financial health, as it reflects just enough assets to meet