The current ratio and its variations are most commonly used to assess a company's liquidity, but these measures do not incorporate the element of time.
In assessing company liquidity, the most commonly used measure is the current ratio and its variations, such as the quick/acid-test ratio.
Furthermore, financial statement users cannot ascertain what a company's current ratio was even the day before the financial statement date.
Explain why it is not surprising that the two Table 1 firms with the smallest differences between their current ratios and quick ratios are Brinker and Southwest Airlines.
In fact, in light of these firms' insignificant inventory amounts, the adequacy of their current ratios is best judged by examining desired threshold levels for quick ratios.
In the sixth pairing, two supermarkets with practically identical current ratios had, nevertheless, dramatically different ratios of operating cash flow to current liabilities.
Our research findings strongly support the contention that systematic differences exist among the Current Ratios and Dept Ratios for Small Companies versus Large Companies.
We examined the Current Ratio (current assets/current liabilities), a measure of liquidity, and the Debt Ratio (total liabilities/total assets), a measure of solvency, for two large sets of public companies categorized as Small Companies and Large Companies.
However, even if the credits are only 10% of the outstanding balances, a current ratio can be easily brought from 2.
In this case the current ratio is 3, although the ratio should be based on 10/4 or a ratio of 2.