Case Study - Inner City Paint Essay

Aspire’s Current Ratio is consistently below the industry average for years 1999-2000. The company’s ratio is lower than the industry due to high current liabilities.

The current ratio measures the company’s ability to pay its short term obligations with its short term assets. Between Coca Cola and PepsiCo, PepsiCo has a higher current ratio implying that is more capable of paying its obligations. The debt management policies of Coca-Cola in conjunction with share repurchase program and investment activity resulted in current liabilities exceeding current assets. From the ratio Pepsi Co suddenly had to pay all its short-term

A. Current Ratio: The ability for a company to pay short term obligations is measured by this ratio. In 2011 Company G moved from 1.86 to 1.77. Compared to the 1.9 Home Center Retail Benchmarks industry ratio, the numbers are below standards. Current Ratio represents values above 2 quartile industry benchmarks data (1.4 to 2.1). Current Ratio represents a weakness for Company G.

This ratio indicates whether it can respond to the current liabilities by using current assets. As many times, we can cover short-term obligations, as better for the company. This indicates that significant and high improvement in the liquidity. The increase in the current ratio 11.5 % will result in an increase in current assets where the current liabilities increased by 2.1%.

The current ratio shows the short-term debt-paying ability of the company also known as liquidity ratio. Components of the current ratio are current assets and current liabilities. To find the current ratio, divide current assets by current liabilities. For example if a current ratio was 2:1, then that company would be able to pay off its short term debt easily. But you should also look at the types of debt the company has because some assets might be larger. For the current ratio a rule of thumb is the ratio should be around 2:1. The company wants to at least make sure that the value of the current assets covers at least the amount of the short-term obligations. In 2013 the current ratio is 1.75 and in 2014 the current ratio is 1.8. This is showing a favorable

Current ratio shows how well the company can pay off its short-term liability obligations. Short-term liabilities are debt due within the next year. Companies that have larger amounts of current assets are better able to pay off their current liabilities. The higher the ratio, the better able the company is to pay current obligations. A low ratio indicates the company is weighted down with current debt and the cash flow will suffer. The equation for current ratio

Obligations involving current liabilities can be evaluated using either the current ratio or quick ratio. The current ratio measures a firms capacity to meet its current liability obligations alongside its current assets, (Horngren et al, 2013, p. 801). Harry Jones current ratio has declined slightly from 2.24 times in 2014 to 2.22 times in 2015. Both figures are above the industry average of 1.80 times and is indicative of the business having sufficient current assets to both cover for any current liabilities and maintain the business in operation, (Horngren, 2013, p. 803).

Increase in current liabilities Substantial increase in current liabilities weakened the company’s liquidity position. Its current liabilities were US$2,063.94 million at the end of FY2010, a 48.09% increase compared to the previous year. However, its current assets recorded a marginal increase of 25.07% - from US$1,770.02 million at the end of FY2009 to US$2,213.72 million at the end of FY2010. Following this, the company’s current ratio declined from 1.27 at the end of the FY2009 to 1.07 at the end of FY2010. A lower current ratio indicates that the company is in a weak financial position, and it may find it difficult to meet its day-to-day obligations.

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The graph above shows a current ratio. It is used for measuring an ability of the company to pay off

Liquidity In analyzing liquidity of the company, the current ratio is not very telling of a falling company. The company increased its ratio throughout the period of the income statement thus building upon its company assets and allowing for a 6-1 ratio of assets over its liabilities. This implies the company is still able to operate sufficiently even though it did not make its optimum current ratio of about 8-1. However, when one takes the inventory out of the equation with the quick ratio, the numbers show the true strength of short term liquidity. The numbers are still good, and do not indicate failure – but are

As the creditors’ view, they prefer the high current ratio. The current ratio provides the best single indicator of the extent, which assets that are expected to be converted to cash fairly quickly cover the claims of short-term creditors. However, consider the current ratio from the perspective of a shareholder. A high current ratio could mean that the company has a lot of money tied up in nonproductive assets.

If this ratio is high means company owns too many debts which may decrease their

CURRENT RATIO show a company’s ability to pay its current obligations that is company’s liquidity. The current ratio position is lower for Honda at 0.33 than for Toyota at 1.22 in 2010. Honda has a large portion of receivables in assets both in trade, notes receivables and finance receivables. It has a huge portion of cash as well. This indicates the company has no problem in terms of generating a positive influx of assets. But in terms of liabilities it has a large portion of short term debt which makes almost 1/3rd of total Current liabilities. Also there is a significant portion of Long Term debt. The higher level of liabilities in the denominator reduces the overall ratio.

Current Ratio is the relationship between a company’s current assets and current liabilities. This form of liquidity ratio also shows if the company can pay its current liabilities. A company’s current ratio can be formulated by dividing the current assets by the current liabilities. In 2016, Starbucks had a ratio of 1.05, which shows that the company has 5% cash and assets that could cover all current liabilities, thus it should not have any problems paying its current liabilities.