Current Ratio Interpretation Example
The value interpretation can be understood with some examples- AIf CR. The current ratio measures the firms ability to pay its short-term debts.
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It is the ratio.
. Current assets and current liabilities have a maturity of less than one year. Current ratio is also known as working capital ratio or 2. This example will clearly indicate what a current ratio indicates.
Cash Ratio Cash Cash Equivalents Current Liabilities. Companies with shorter operating cycles such as retail stores can survive with a lower current ratio than say for example a. The ideal current ratio is proportional to the operating cycle.
Cash Ratio 1000000 2200000 1300000 1000000 139 The figure above indicates that. Some industries for example retail have typically very high current ratios while others such as service firms have relatively low current ratios. This liquidity ratio can be arrived at by simply dividing a businesss current assets by its current liabilities as in the following example.
Current ratio 90000 177000. If a company ABC Ltd. Interpretation of Current Ratio Now we know how to calculate the value of the current ratio.
Liquidity concerns are typically indicated by. A current ratio of 1 is safe. In the example above if all of Company XYZs current liabilities were due on.
Current ratio analysis is used to determine the liquidity of a business. Cash Ratio 300000 700000 900000. A higher current ratio indicates that a company is able to meet its short-term obligations.
Current ratio interpretation example. Company XYZ has a cash ratio of 1. The results of this analysis can then be used to grant credit or loans or.
The ratio for Johnson Jackson Corp is calculated as follows. What is Current Ratio Analysis. AAPL having a current ratio of 136 indicates that the company has more than enough to cover its current liabilities if these liabilities were all.
The current ratio ranging from 15 to 3 is considered healthy in general. So the current ratio shows the firms. Current Assets Ratio.
Holds cash of 15 lakhs inventory of 25 lakhs marketable.
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