Cash Ratio In Southwest Airlines

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

The current ratio measures a company’s ability to pay short-term and long-term obligations. This number is found by taking a company’s current assets and dividing it by current liabilities. Below are Walmart, Inc.’s and Costco Wholesale Corporation’s current ratio for the 2015 and 2016 fiscal year end. The industry average is also included for comparison.

The current ratio is an indication of a company’s ability to pay current liabilities with current assets. The formula for calculating the current ratio is current assets divided by current liabilities. DHG has a current ratio of 1.69 for year 11. When compared to the current ratio of 1.83 in year 10 and industry data quartiles of 3.1, 2.1, and 1.4 this ratio

Current ratio - Measures whether or not a firm has enough resources to pay its debts over in the short-term.

Parrino, Kidwell, & Bates (2012) detail the current ratio as current assets divided by liabilities. The current ratio identifies a firm’s potential to pay short-term liabilities; higher liquidity is a good sign for potential creditors (Parrino et al., 2012). At the same time, however, the current ratio should not greatly exceed benchmarks of other competitors (Parrino et al., 2012). This could be indicative of mismanagement of current assets and less cash flow for investors (Parrino et al., 2012).

Current: “The current ratio is a financial ratio that shows the proportion of current assets

The current ratio is a widely used measure for evaluating a company’s liquidity and short-term debt-paying ability. The ratio is computed by dividing current assets by current liabilities. A high current ratio indicates that a company has sufficient current assets to pay current liabilities as they become due. The 2016 ratio of 0.79:1 means that for every dollar of current liabilities, General Mills had $0.79 of current assets. The current ratio increased from 0.75:1 in 2015. Compared to the industry average of 1.83:1, General Mills appeared to be less liquid.

a. Current ratio is known as the company’s ability to pay back their debits and obligations. The current ratio of .98 which is under 1 means the company would not be able to pay of the obligations that it owes. This shows the company is not in good standing and will cause more risk, if invested into.

The first of the liquidity ratios is the current ratio. The current ratio is the number of times that current assets exceed current liabilities. It is calculated by dividing the company’s current assets by their current liabilities. In most circumstances, the higher the current ratio, the better. The ratio is an excellent indication of the company’s ability to pay its short-term debts. A decline in the current ratio could imply that the company is having trouble generate cash, it could also be a result of increases of short-term debt, and/or a decrease in current assets. An improvement in the current ratio implies that the company has an increased ability to pay off current liabilities. As current ratio declines, the overall risk increases, and as it improves, the risk declines. From 2013 to 2014, Coke’s current ratio dropped from 1.13 to 1.02 before rising to 1.24 in the most recent year of 2015. However, compared to Pepsi’s ratio of 1.31, Coke’s current ratio is lower. To increase their ratio to be more competitive with their benchmark, Coke could use long-term borrowing to pay off some of their current liabilities.

This is the current assets divided by current liabilities and it also measures a company’s capability to pay obligations (SOURCE). Boeing Co.’s current ratio for 2015 was 1.35:1 and Lockheed Martin had a current ratio of 1.15:1 (SOURCE). Due to the fact that the ratios for both companies were over 1, both Boeing and Lockheed Martin have the ability to easily repay obligations if required in a short period of time. The difference is that Boeing Co. has higher current ratio and therefore a greater ability to pay off obligations that are expected in the next business year.

The current ratio is a function of current assets divided by current liabilities and it is utilized to determine the health of working capital to meet short term financial responsibilities. If the current ratio is less than 2.0 it should be concerning to the company and the ability to pay short-term liabilities is in danger. In general, a current ratio of 2.0 or better means a positive probability that all short term liabilities will be met. However, the proper use of capital can become a cause for concern if the liquidity ratio is too high, meaning there are cash and assets laying around and not being put to good use. The current ratio for Nano-Brewery is 4.47. This indicates that although paying liabilities will not be an issue, there may be better ways for Nano-Brewery to leverage their available assets.

The current ratio will help us understand ASNA’s liquidity, meaning how quickly the company can turn its assets into cash in order to pay off its short-term obligations.

The current ratio lets one know what is exactly happening in the business at the present time. The current ratio is defined as current assets such as accounts receivables, inventories any type of work in progress or cash that are divided by the business current liabilities. Business liabilities can consist of many things such as insurance on building, employee insurance these liabilities way heavy on any type of business especially one that is large as Landry’s Restaurant.

According to Cleverley, W.O., Song, P.H., Cleverley, J.O, (2011), “Current Ratio is a liquidity ratio that measures the proportion of all current assets to all current liabilities to determine how easily current debt can be paid off’ (p.520). The above chart demonstrated desirable results in the year 2013 for both ratios. In addition, Cleverly et al. defined that the “Quick Ratio is a measure of the organization’s liquidity namely, cash + marketable securities + net accounts receivable/current liabilities” (p.532).

While assessing Current Ratio I found that Pepsi Co has had a decrease in Current Ratio from 1.44 in 2009 to 1.11 in 2010 and .96 in 2011. What this means is that in 2011 Pepsi Co would not be able to pay back short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). As for 2010 and 2009 Pepsi Co would be able to pay back short-term liabilities because the ratio is over 1.0. The Current Ratio gives a sense of the efficiency of a company’s operating cycle or its ability to turn their products into cash to pay liabilities.