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An analyst is evaluating the liquidity of an Australian manufacturing company and obtains the following liquidity ratios: Fiscal Year 2011 2010 2009 Current ratio 3.1

An analyst is evaluating the liquidity of an Australian manufacturing company and obtains the following liquidity ratios:

Fiscal Year 2011 2010 2009

Current ratio 3.1 2.9 1.6

Quick ratio 1.8 1.9 1.0

both ratios have exactly the same denominator, current liabilities, then why both ratios are depicting contradictory companys liquidity? Explain the possible reasons.

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