Question
Your firm has a Current Ratio (current assets/current liabilities) and Quick Ratio ((current assets inventory)/current liabilities) of 3.0 and 2.0 respectively. You notice that the
Your firm has a Current Ratio (current assets/current liabilities) and Quick Ratio ((current assets inventory)/current liabilities) of 3.0 and 2.0 respectively. You notice that the industry average Current Ratio and Quick Ratio are 3.0 and 2.5 respectively. What does this probably mean about your company?
a. The company has more inventory relative to current liabilities than the industry average
b. The company has more current liabilities relative to long-term debt than the industry average
c. The company must have just paid out a stock dividend
d. The company has a higher net working capital to total assets ratio than the industry average
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