Podcast
Questions and Answers
What does a current ratio of 1.9 indicate about a company?
What does a current ratio of 1.9 indicate about a company?
- Current liabilities are almost double current assets
- Current assets are equal to current liabilities
- Current assets can cover current liabilities almost 2 times (correct)
- Current liabilities are almost double the industry average
Why is it concerning that a company's current ratio is lower than the industry average?
Why is it concerning that a company's current ratio is lower than the industry average?
- It implies the company is not affected by economic trends
- It indicates the company is performing better financially
- It means the company is too conservative in its financial management
- It shows that the company may have cash flow issues (correct)
Why might the quick ratio be a more accurate measure of liquidity than the current ratio for a company?
Why might the quick ratio be a more accurate measure of liquidity than the current ratio for a company?
- It excludes accounts receivable from the calculation
- It considers fixed assets as part of the current assets
- It excludes inventory which is not easily convertible to cash (correct)
- It includes long-term investments which are easier to convert to cash
How does a quick ratio of 0.36 for a company compare to the industry's quick ratio?
How does a quick ratio of 0.36 for a company compare to the industry's quick ratio?
Why might a current ratio trend analysis be useful in evaluating a company's financial health?
Why might a current ratio trend analysis be useful in evaluating a company's financial health?
What could be a reason for a company having a lower current ratio compared to the industry?
What could be a reason for a company having a lower current ratio compared to the industry?
Why is excluding inventory important when calculating the quick ratio?
Why is excluding inventory important when calculating the quick ratio?
If a company has a quick ratio of 1, what does this imply?
If a company has a quick ratio of 1, what does this imply?
Why might a company's quick ratio be significantly lower than its current ratio?
Why might a company's quick ratio be significantly lower than its current ratio?
What can be inferred about a company with a very low quick ratio in comparison to the industry?
What can be inferred about a company with a very low quick ratio in comparison to the industry?
