Current Ratio Interpretation Example

To gauge this ability the current ratio considers the current. This indicates that the company has sufficient cash balance to make the.

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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 low working capital ratio indicates that the company is not operating at its optimum. The Current Ratio formula is Current Assets Current Liabilities. The current ratio is a liquidity ratio that measures whether a firm has enough resources to meet its short-term obligations.

Note Working Capital Current Assets-Current Liabilities. Although similar the acid test ratio provides a more rigorous assessment of a companys ability to pay its current liabilities. Payable turnover ratio interpretation.

It compares a firms current assets to its current liabilities and is expressed as follows-. The ratio considers the weight of total current assets versus total current liabilities. The following observations can be made with regards to Colgate Ratios.

It comprises inventory cash cash equivalents. Acid Test Ratio vs Current Ratio. It can be quite difficult to ascertain the reason for the results of a ratio.

From the above-calculated data we analyzed that the quick ratio has fallen from 17 in 2011 to 06 in 2015. High payable turnover ratio. The acid-test ratio can be calculated as follows.

The current ratio is 275 which means the companys currents assets are 275 times more than its current liabilities. It indicates the financial health of a company. As we have already understood PTR indicates how frequently the company makes payment towards its account payables.

For example in 2011 Current Assets were 4402 million and Current Liability was 3716 million. Interpretation of the Cash Ratio. Likewise we calculate the Current Ratio for all other years.

A ratio above 1 means that a company will be able to pay off its current liabilities with cash and cash equivalents and have funds left over. Current ratio is a useful test of the short-term-debt paying ability of any business. The acid-test ratio is a more conservative version of the current ratio another well-known liquidity metric.

High payable turnover ratio indicates the company is making the payment more frequently. A higher working capital indicates that a company utilizes its working capital very efficiently. The current ratio is a liquidity ratio that measures a companys ability to pay short-term and long-term obligations.

The cash ratio indicates to creditors analysts and investors the percentage of a companys current liabilities that cash and cash equivalents will cover. For each specific parameter value in the parameter space the likelihood function therefore assigns a probabilistic prediction to the observed data Since it is essentially the product of sampling. For example a current ratio of 21 might appear to be excellent until you realize that the company just sold a large amount of its stock to bolster its cash position.

It must mean that most the current assets The Current Assets Current assets refer to those short-term assets which can be efficiently utilized for business operations sold for immediate cash or liquidated within a year. A higher working capital turnover ratio is always better. The likelihood function often simply called the likelihood describes the joint probability of the observed data as a function of the parameters of the chosen statistical model.

The current ratio is calculated as the current assets of Colgate divided by the current liability of Colgate. Current ratio Current assetsCurrent liabilities 1100000400000 275 times. Current ratio Current Assets Current Liabilities The current ratio is an indication of a firms liquidityAcceptable current ratios vary from industry to industry.

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