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hi mike
can you explain current ratio & quick ratio please
having 1:1 is this good or bad I know it is base on the industry but to say industry has 1.6:1 and the business has 1:1 for current ratio and industry has for quick ratio 1.4:1 and the business has .57:1 can you help me on this please
You’re correct in saying that it depends on the business
However, given the figures you have given me, subject to there being specific reasons in the board’s strategy, the entity looks to be in a weaker position that the industry generally
Imagine figures to fit into these ratios, starting with $1,000 for current liabilities
That means that the industry has $1,600 current assets of which $200 is tied up in inventory
Our company has just $1,000 current assets of which $430 is tied up in inventory
The industry’s inventory represents 12.5% of its current assets whereas 43% of our company is wrapped up in inventory – maybe suggesting old, obsolete or damaged inventory
OK?
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