2026-01-07 02:26:25

How to determine if a company can really pay off its debts? This is a question many people want to ask.

A company's liabilities come in many forms—bank loans, short-term working capital, accounts payable to suppliers... a jumble of everything. Those due within one year are called current liabilities.

The company's assets are similar. Cash, marketable financial assets, money owed by customers, inventory piled up in warehouses... things that can be converted into cash in a relatively short period, collectively called current assets.

**A simple formula can reveal the clues:**
Current Ratio = Current Assets ÷ Current Liabilities

This number reflects the company's short-term debt-paying ability. What does it mean if the current ratio is below 1? It indicates that the company's cash on hand plus assets that can be quickly sold are not enough to cover current liabilities. If creditors come knocking for repayment, it could be quite awkward.

When facing this kind of dilemma, there are usually a few options:

**Option 1: Generate cash quickly.** If the company's operating cash flow is continuously flowing in, it can still manage to turn over. But the problem is, once you need to consider this, it often means operating cash flow is already tight or even negative.

**Option 2: Bring in new blood.** Public companies can raise new funds and new shareholders through a private placement, easing cash pressure. However, the process of a private placement is complex and time-consuming...

Understanding the logic behind these financial indicators is much more practical than just looking at the numbers.

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AirdropHunter420

· 01-07 02:56

A current ratio below 1 is a ticking time bomb, it will explode sooner or later. This theory sounds nice, but the reality is often much more complicated. Private placements really take time; it's more accurate to look directly at cash flow. Nice-looking numbers on the books don't mean much; you need to see if real cash is flowing in. The problem is most people simply don't understand these things; they just follow the trend and buy, buy, buy.

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SatoshiChallenger

· 01-07 02:56

A current ratio below 1 triggers a private placement. I just laughed—aren't they betting on creditors reacting slowly? [Cold Laugh] Looking at historical data, the success rate of this approach is actually quite bleak; most end up in liquidation. Even with tight operating cash flow, they still talk about self-sustaining growth. It's like a patient claiming to have a strong immune system. Truly healthy companies have already kept this number above 1.5. Now they only think about financial reports when they need to collect debts. Ironically, the analysts who love to talk about this theory never dare to verify it on their own accounts. Actually, ratios are just mirrors. They reveal whether a company is dead or alive—look for yourself. In simple terms, it's a symptom chart on the eve of financing. Don't be fooled by the numbers. The current ratio can be manipulated in the first quarter, but will collapse in the second. Haven't we learned enough lessons from history?

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ponzi_poet

· 01-07 02:56

A current ratio below 1 is playing with fire; trouble is bound to happen sooner or later.

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MerkleDreamer

· 01-07 02:54

A current ratio below 1 means bankruptcy? Not necessarily, it depends on cash flow. Operating cash flow is the real key; everything else is虚的. The process of private placements... is really annoying, but in the end, equity will still be diluted. A good ratio doesn't mean the company won't fail; I've seen many companies that looked good but ended up爆雷. Well said, numbers can be deceiving, but cash won't be.

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DegenWhisperer

· 01-07 02:47

A current ratio below 1 is playing with fire. Don't believe in the nonsense of "still able to turn over." --- Raising additional funds through private placements and self-sustaining growth—basically, they have no money. --- This theory seems simple, but when creditors show up, it becomes completely useless. --- So the core still depends on cash flow; everything else is虚假的. --- The problem is that most people don't look at these details when reviewing financial statements and end up getting cut. --- When operating cash flow turns negative, it's time to run. Don't wait for news of private placements.

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DegenDreamer

· 01-07 02:35

A current ratio below 1 is a red flag; sooner or later, you'll get burned. --- In simple terms, it's all about cash flow. Without money, everything is pointless. --- The set of private placements is really convoluted; it's better to make money directly. --- Debt collectors coming to demand repayment is really awkward hahaha. --- When operating cash flow tightens, you have to start looking for new blood. I see through this routine. --- To analyze financial reports, you still need to dig into these details. Looking at numbers alone makes you vulnerable. --- Only companies with a current ratio >1 are safe to invest in; stay away from those below 1.

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