▁ 1 ▁indicates ▁that ▁the ▁company ▁may ▁have ▁problems ▁meeting ▁its ▁short - term ▁oblig ations . ▁Some ▁types ▁of ▁business es ▁can ▁operate ▁with ▁a ▁current ▁ratio ▁of ▁less ▁than ▁one , ▁however . ▁ ▁If ▁invent ory ▁turns ▁into ▁c ash ▁much ▁more ▁rapidly ▁than ▁the ▁accounts ▁pay able ▁become ▁due , ▁then ▁the ▁firm ' s ▁current ▁ratio ▁can ▁comfort ably ▁remain ▁less ▁than ▁one . ▁In ventory ▁is ▁val ued ▁at ▁the ▁cost ▁of ▁acqu iring ▁it ▁and ▁the ▁firm ▁int ends ▁to ▁sell ▁the ▁invent ory ▁for ▁more ▁than ▁this ▁cost . ▁The ▁sale ▁will ▁therefore ▁generate ▁substantial ly ▁more ▁c ash ▁than ▁the ▁value ▁of ▁invent ory ▁on ▁the ▁balance ▁sheet . ▁Low ▁current ▁r ati os ▁can ▁also ▁be ▁just ified ▁for ▁business es ▁that ▁can ▁collect ▁c ash ▁from ▁customers ▁long ▁before ▁they ▁need ▁to ▁pay ▁their ▁supp liers . ▁ ▁Lim itations ▁▁ ▁The ▁ratio ▁is ▁only ▁useful ▁when ▁two ▁companies ▁are ▁compared ▁within ▁industry ▁because ▁inter ▁industry ▁business ▁operations ▁differ ▁substantial ly . ▁ ▁To ▁determine ▁liquid ity , ▁the ▁current ▁ratio ▁is ▁not ▁as ▁helpful ▁as ▁the ▁quick ▁ratio , ▁because ▁it ▁includes ▁all ▁those ▁assets ▁that ▁may ▁not ▁be ▁easily ▁liquid ated , ▁like ▁pre pa id ▁exp enses ▁and ▁invent ory . ▁ ▁See ▁also ▁Deb t ▁ratio ▁Quick ▁ratio ▁Rat io ▁ ▁References ▁ ▁Category : Fin an cial ▁r ati os ▁Category : Work ing ▁capital ▁management <0x0A> </s> ▁The ▁French ▁Fur ze ▁( fo aled ▁on ▁May