Dynashers Case Study Essay

This ratio is similar to current ratio, except that it excludes inventory from current assets. Inventory is subtracted because it is considered to be less liquid than other current assets, that is, it cannot be easily used to pay for the company’s current liabilities. A company having a quick ratio of at least 1.0, is considered to be financially stable. It has sufficient liquid assets and hence, it will be able to pay back its debts easily (Qasim Saleem et al., 2011).

S&S Air’s current and cash ratios are below average as compared to the entire industry. These ratios show that S&S has less liquidity than others in the industry. By comparing these ratios we can see that S&S Air has less inventory, as compared to current liabilities, than the median of other companies. Based on cash ratio, the company has possible access to short-term loans. From receivables turnover ratio we

A decreasing trend in the current ratio indicated by JB Hi-Fi from 2015 to 2017 that reveals a lesser safety of margin for short term creditor. As we can see from the table current ratio has declined by 0.3 times. This effect is a distinctive sign that the organization may experience in the situation of considerable difficulties when they pay their present liabilities for short run. By these outcomes, it is obvious that regardless of whether the organization exchanges all - of its present

With the use of financial ratios the following conclusions were deducted (see exhibit A for calculations). Ice-Fili is in good financial position since they are profitable given their positive working capital and no long-term debt. Their current ratio has increased over the past 4 years which is a good indicator of liquidity but also illustrates an inefficient use in cash.

Liquidity ratios measure the short term ability of a company to pay its obligations and meet their needs for maintaining cash. According to Cagle, Campbell & Jones (2013), “A good assessment of a company’s liquidity is important because a decline in liquidity leads to a greater risk of bankruptcy” (p. 44). Creditors, investors and analysts alike are all interested in a company’s liquidity. After computing liquidity

The liquidity position of a company can be evaluated using several ratios which evaluate short-term assets and liabilities and a firm’s ability to settle short-term debts (Gibson, 2011). These ratios can provide insight into a firm’s ability to repay its debts in the short term (Gibson, 2011). In turn they suggest a firm’s capacity for debt-satisfying capabilities into the future (Gibson, 2011). This paper will use financial statement data as cited in Gibson (2011) from 3M Company (3M) to better understand liquidity measures to evaluate a firm’s total liquidity position. The following paper will focus on various liquidity calculations, their meaning, and their interpretation relative to 3M. Finally, an overall view of 3M’s liquidity

The measure of liquidity is determined by two basic measures that consist of the current ratio and quick (acid-test) ratio. As shown in the above graph the two ratios are used in accordance to show the liquidity of each company. The liquidity ratio is “used to determine a firm’s ability to satisfy its short-term obligations as they come due” in a firm’s operating cycle (Gitman & Zutter, p.65). The first ratio shown in the graph is the current ratio, and is one of the more popular ratios used in finance. Current ratio is a determinant of whether or not a company is able to have the funds for obligations as they come due. DISH Network has a fluctuation pattern over the five years that are given. In 2007 DISH Network had a current ratio of 1.00, and then 0.70 in 2008—which is the lowest over the five year—period, while in 2009 the current ratio recovers to 1.06. To say the least, the ratio teeters down to 1.02 in 2010, but achieves its highest current ratio of 1.16 in 2011. This shows that DISH Network overall has a good current ratio that proves the company to be acceptable in its liquidity. However, in 2008 the firm

The quick ratio reflects on a company’s ability to meet its current liabilities without liquidating inventories that could require markdowns. It is a more stringent test of liquidity than the current ratio and may provide more insight into company liquidity in some cases. For Colgate-Palmolive, the quick ratio has declined from 0.73 in 2008 to 0.58 in 2010. While this does not necessarily mean a problem, a higher current ratio and quick ratio analysis will mean that the company will not have difficulty in meeting its short-term obligations from its operations and not by liquidating its assets.

The acid-test ratio is calculated by dividing a company’s quick assets by its current liabilities (Libby, 660). This ratio excludes those more illiquid elements of current assets before measuring a company’s current assets against its current liabilities (Spiceland, 134) (Libby, 660). Lastly, the cash ratio is calculated by adding a company’s cash and cash equivalents, and dividing them by its current liabilities (Libby, 659). While it does not consider most current assets, the cash ratio reveals the amount of current liabilities which a company could settle using only available cash and investments which will become cash in the near future (Libby, 659). While these ratios are not completely informative in isolation, they provide a snapshot of the liquidity of companies and can be useful to creditors when used in conjunction with other measures of long-term profitability (Spiceland, 135).

Another important measure of the liquidity of the company is the percentage of current assets to the total assets. Companies maintaining a high degree of liquidity generally tend to keep this ratio pretty high .For Google Corporation we see that he value of this ratio is as high as 60.41. If we compare this to the same ratio for the

Understanding the meaning of financial ratios is imperative to different stakeholders both within and outside of a company. Management reviews different ratios to measure how effective the strategies used to run the business are within a given time period. Money Managers and other types of investors use ratios to determine investment strategies in different types of companies. The use of the ratios helps give a consistent look at different types of businesses whether large or small and determine profitability and return on equity. The purpose of this paper is examine liquidity ratios as applied to three companies and gain understanding of how the ratios studied disclose liquidity positions.

Liquidity ratio is the ability of the company to pay/close its liabilities. Also, it is the ability of a company to turn its assets into cash to pay off its current obligations. Liquidity ratios that we will be focusing on are: current ratio, quick ratio, account receivable turnover, and inventory turnover.

Liquidity ratios, like the current ratio, provide information about a firm's ability to meet its short time financial obligations. Short-term creditors seek a high current ratio from prospective clients since it reduces their risk. For investors in a company, such as shareholders, a lower ratio is sought, so that more of a firm's assets are working to grow the business. When computing financial relationships, a good indication of the company's financial strengths and weaknesses becomes clear. Examining these ratios over time provides

In the consumer goods industry, liquidity ratios are paramount (Tarver, 2017) as they determine the company’s immediate revenue-generating activities and consequent ability to meet short-term liabilities. This is measured using Current and Quick Ratios (Appendix 1, a). The industry has an average Current Ratio of 0.86 TTM (Morningstar, 2017). RB’s Current Ratios seem to have increased from 2015’s 0.57 to 0.63 in 2016 (Appendix 1, a). This means that if RB liquidates all its Current Assets, they will only be able to cover 57% and 63% of its liabilities and not the full amount. While there has been an increase in percentage coverage between the years, RB is still below the industry average and therefore needs to collect back money owed to them quicker, stop selling inventory on credit or sell-off unproductive current assets. For a holistic view of the RB’s liquidity, the Quick Ratio was calculated (Appendix 1, a). By removing Inventory from the equation, the ratio doesn’t take into

Financial analysts usually have viewed the liquidity ratios like current ratio and quick ratio as key indicators of a firm 's liquidity performance. But, they fail to distinguish that the fundamental liquidity protection against unanticipated discrepancies in the amount and timing of operating cash inflows and outflows is provided by a firm 's cash reserve investments in conjunction with its unused borrowing capacity rather than by total current asset coverage of outstanding current liabilities. A concentration of current assets in the fewer liquid receivables and inventory forms possibly will generate an increasing current ratio reflecting a worsening capability by the firm to cover its current liabilities rather than an enhanced liquidity position for the firm (Richards & Laughlin,1980). Ruback (2003) in his study showed that Dell and