Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Current ratio (CA) or working capital ratio
CA = Current assets/Current liabilities (times)
Current ratio measures the short term solvency or liquidity; it signifies the extent to which the claims of short-term creditors are covered by assets. Current ratio is basically looking at the working capital of the company. Effective management of working capital ensures that organisation is running efficiently. This will ultimately result in increased profitability and positive cash flows. Effective management of working capital involves low investment in non-productive assets such as trade receivables, inventory and current account bank balances. Also maximum use of free credit facilities such as trade payables ensures efficient management of working capital.
Normal current ratio is around 2:1 however this varies within different industries. Low current ratio may indicate insolvency. High ratio may indicate not maximising return on working capital. Valuation of inventories would have an impact on the current ratio, as will year end balances and seasonal fluctuations.
The use of ratios
We will now look at some of the working ratios in detail and illustrate how they can be interpreted.
Question 1: (a) Highlight the main theories of the level and term structure of interest rates. (b) To what extent they can be used to explain the level and structure of inte
do you know the valuation of this case?
what is the applicability of an operating cycle in vegetable growing?
You decide to max-out your annual investment into your Individual Retirement Account and invest $6,000 at the end of each year for the next 17 years. At the end of this investment
Gabi wishes to purchase an apartment in Berea Johannesburg which is situated in a quiet street. The purchase price, including costs, is R355 000 and she wishes to obtain a 100% mor
A company's current assets are less than its current liabilities. Company issues new shares at full market price. What will be the effect of this transaction upon company's work
Power is a listed group reporting under IFRS. The group was established when Power purchased an 80% of the ordinary share capital of Shuttle, a listed company, on 1 January 2009 fo
Q. Show example on aggressive working capital policy? With an aggressive working capital policy, a company would hold minimal levels of inventories in order to minimise costs.
Question I: (50 points) Derive the pricing formula for the expected excess return of a risky stock and the riskfree stock in the traditional consumption-CAPM assuming that the leve
Question 1: (a) Explain the Law of One Price and discuss its limitation in explaining exchange rates. (b) According to you, what factors determine exchange rates in the long
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd