Ratio Definitions

Ratio Definitions - When calculating and analyzing the...

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When calculating and analyzing the ratios for both Staples and Office Depot, we must understand the ratios in comparative terms for the year 2006 from the annual report from each company. We do not have the ratios from 2005 for either company so we cannot speak as to how well either is performing from year to year. The only way we are going to analyze each with their ratios, is by comparing them to each other and not by growth or efficiency differentiations from year to year. Office Depot’s current ratio is 1.1634, while Staples’ ratio is 1.5892, showing a higher current ratio and higher liquidity for Staples. The current ratio is an indication of the company’s ability to meet short term debt obligations. The higher the ratio, the more liquid the company is. This ratio indicates liquidity but it also may indicate an inefficient use of cash and other short term assets. This could also mean an inefficient use of cash, though that would have to be determined through other ratios. Office Depot’s quick ratio is .6381, and Staples ratio is .9008. The quick ratio is viewed as a sign of a company’s financial strengths and weaknesses. The higher the number, the faster a company can
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This note was uploaded on 04/08/2008 for the course FI 305 taught by Professor Hartman during the Fall '08 term at Bentley.

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Ratio Definitions - When calculating and analyzing the...

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