What does it mean if a company has a current ratio of 3.25?

A. The company's ability to pay off its short-term debt exceeds what is generally considered adequate.
B. The company's current liabilities exceed its current assets.
C. The company's ability to pay off its short-term debt falls below what the industry generally considers adequate.
D. The company has an excess of inventory that cannot be easily converted into cash.

A current ratio of 3.25 means that a company's current assets are 3.25 times greater than its current liabilities. This indicates that the company has a strong ability to pay off its short-term debts, as it has sufficient liquid assets to cover its obligations.

For example, if a company has $100,000 in current assets and $30,000 in current liabilities, its current ratio would be 3.33 ($100,000 / $30,000).

Therefore, the correct answer is: a.) The company's ability to pay off its short-term debt exceeds what is generally considered adequate.

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