Fin Project 1 - Adam Barber Fin 320 Project 1 Liquidity...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Adam Barber Fin 320 Project 1 Liquidity Ratios 2.07 1.8 1.58 1.39 1.32 1.44 0.62 0.28 0.26 0.82 0.77 0.80 0.19 0.09 0.11 0 0.5 1 1.5 2 2.5 1 2 3 years from Feb 05- Mar 07 Industry Current Ratio Current Ratio Industry Quick Ratio Quick Ratio Cash Ratio The Current Ratio, Quick Ratio, and Cash ratio are all liquidity ratios depicting how fast the company’s assets can be turned into cash. The current ratio for best buy fell in the year of 2006; both the current liabilities and the current assets for best buy dropped for the year. But since, Current liabilities dropped less in proportion to the current liabilities, the ratio decreased. In 2007, the opposite happened where the current liabilities dropped substantially while the current assets had a smaller decrease resulting in a higher current ratio. The industrial current ratio was much higher than Best Buys in the past than it is today. While most companies had a rapid decline in their current ratio, best buys had an increase which caused them to be much closer to the competition in 2007, than they were in 2004. The quick ratio subtracts the inventory off of the current assets because it is the least liquid asset. This gives a better measure better understanding how fast best buy can cover its current liabilities. The quick ratio also took a small dive in 2006, from an increase of liabilities. Over the course of 3 years, the ratio stayed nearly consistent but decreased, meaning that best buy is becoming increasingly unable to cover their current liabilities with their current assets. The industrial average was lower than best buys meaning that most companies kept a greater proportion of stock compared to best buy. An
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Barber 2 increase in inventory would cause the quick ratio to be closer to zero. Finally, on a very short term note the cash ratio tells us how much cash to liabilities the company maintains. Best buy over the course of 3 years steadily increased its holdings of cash. Since the cash ratio is the only ratio to steadily increase, this could mean that best buy could have less inventory on hand at a given point resulting in a higher percentage of cash in the current asset category. Long Term Ratios
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 7

Fin Project 1 - Adam Barber Fin 320 Project 1 Liquidity...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online