Xena has the following working capital ratios:
20X9 20X8
Current ratio 1:2:1 1:5:1
Receivables days 75 50
Payables days 30 45
Inventory turnover 42 35
Which of the following statements is true?
Correct analysis: Xena is suffering from a worsening liquidity position in accounting year 20X9.
Confusion: How do I compare current ratios in this question? Is 1:2:1 less than 1:5:1 or more?
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Working capital cycle
3y ago#1I don't know which book you are using, but the ratios should be typed as 1.2:1 and 1.5:1, which means ratios of 1.2 and 1.5.
1.2 is lower than 1.5.
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