Simple Current Ratio Interpretation Pdf
If Current Assets Current Liabilities then Ratio is equal to 10 - Current Assets are just enough to pay down the short term obligations.
Current ratio interpretation pdf. A high ratio implies that the company has a. Financial analysis is the process of using fi nancial information to assist in investment and fi nancial decision making. If Current Assets Current Liabilities then Ratio is less than 10 - a problem situation at hand as the.
The ratio of apples to oranges is 200 100 which we can more conveniently express as 21 or 2. Ratio analysis is a useful management tool that will improve your understanding of financial results and trends over time and provide key indicators of organizational performance. ACID TEST RATIO QUICK RATIO.
The relationship between the price for which a unit of livestock can be sold in the commodities markets and the price of the food required to raise that unit to market weight. A financial ratio is a comparison between one bit of financial information and another. Overall the study shows that Receivable days payable days inventory days and size of the.
It indicates the financial health of a company. Managers will use ratio analysis to pinpoint strengths and weaknesses from which strategies and initiatives can be formed. It has been an important indicator of the firms liquidity position and is used as a complementary ratio to the current ratio.
A Current ratio b Acid Test Ratio c StockTurnover Ratio d Debtors Turnover Ratio e Creditors Turnover Ratio and Average Debt. The Current Ratio formula is Current Assets Current Liabilities. The current ratio also known as the working capital ratio measures the capability of a business to meet its short-term obligations that are due within a year.
A ratio greater than 1 means that the company has sufficient current assets to pay off short-term liabilities. Interpretation and benchmark Current ratio Current assets Current liabilities Short-term debt paying ability. The current ratio and the quick ratio rely on the values identified as current assets and current liabilities in the Statement of Financial Position.