Beautiful Current Ratio Decrease Interpretation

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Interpretation of Current Ratios.

Current ratio decrease interpretation. If Current Assets Current Liabilities then Ratio is equal to 10 - Current Assets are just enough to pay down the short term obligations. It would be unfair if the liquidity is concluded just on the basis of the ratio. The current ratio is a figure resulted from dividing current assets by current liabilities of a firm.

Calculation of Current assets and Current liabilities. A high ratio implies that the company has a thick liquidity cushion. It is calculated by dividing current assets by current liabilities.

Lower the current liabilities better the quick ratio is. Interpretation of Current Ratio. Current liabilities which form a part of the denominator of the quick ratio are to be reduced in order to have the better current ratio.

The current ratio is a very common financial ratio to measure liquidity. If a companys current ratio falls below 1 the company likely wont. Time period analyses of the current ratio.

The ratio considers the weight of total current assets versus total current liabilities. It suggests that the business has enough cash to be able to pay its debts but not too much finance tied up in current assets which could be reinvested or distributed to shareholders. This ratio also known as working capital ratio is a measure of general liquidity and is most widely used to make the analysis of a short-term financial position or liquidity of a firm.

If Current Assets Current Liabilities then Ratio is greater than 10 - a desirable situation to be in. The higher the ratio result the better a companys liquidity and financial health. It might be required to raise extra finance or extend the.

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