Short-term solvency, Financial Accounting

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Example of Short-term Solvency

 

                        Current Ratio = Current Assets / Current Liabilities

                                               = 5.38

                        This has increased from 3.97 in the previous year to 5.38 in the current year, indicating that the working capital of the company has increased and hence strengthening its liquid position.

 

                        Quick Ratio = (Current Assets - Inventory) / Current Liabilities

                                            = 4.57

                        This has increased from 3.47 in the previous year to 4.57 in the current year, indicating that there was some reduction in its Inventory as a part of it was sold off.

 

 


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