What is the current ratio? What does the current ratio measure? What are reasons for using the current ratio for analysis?
Answer to relevant QuestionsWhat are the limitations of the current ratio as a measure of liquidity?What problems are expected in an analysis of a company using the LIFO inventory method when costs are increasing? What effects do price changes have on the (a) Inventory turnover ratio (b) Current ratio?Why is analysis of a company's capital structure important? a. Why might an analysis of financial statements need to adjust the book value of assets?b. Give three examples of the need for possible adjustments to book value.Comment on the following assertion: “Debt is a supplement to, not a substitute for, equity financing.”
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