The Ratio Of Coke's Current Ratio

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Current Ratio 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. Quick Ratio Next for the liquidity ratios is the quick ratio. The quick ratio, also called the acid test ratio, is a more accurate test of liquidity than the current ratio because inventory is excluded from current assets. Liquid assets are assets that can easily be converted into cash or cash equivalents. Inventories are considered to be the

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