What are cash-based ratios of liquidity? What do they measure?
Answer to relevant QuestionsAssume a company’s days’ sales in receivables is 60 days, compared to 40 days for the prior period. Identify at least three possible reasons for this change.What is the rule of thumb governing the expected level of the current ratio? What risks are there in using this rule of thumb for analysis? How should we treat deferred income taxes in an analysis of capital structure? Equity capital on the balance sheet is reported using historical cost accounting and at times differs considerably from market value. How should our analysis allow for this, if at all, in analyzing capital structure? Why are debt securities regularly rated while equity securities are not?
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