Current Ratio = Current Assets/Current Liabilities 2020 2019 13,896,794,073/13,864,318,289 = 1.00:1 12,703,448,506/13,706,759,724 = 0.93:1 This means that the business has P1.00 current assets to pay for a peso of a current liability in 2020 against P0.93 current assets to pay for a peso of current liability in 2019. The rule of thumb is 2:1. Both periods show illiquidity with 2019 showing it is very illiquid. Quick Ratio or Acid Test Ratio = Quick Assets / Current Liabilities 2020 2019 8,811,687,849/13,864,318,289 = 0.64:1 8,055,634,208/13,706,759,724 = 0.59:1 This means that the business has 0.64 quick assets to pay for a peso of current liability in 2020. Both periods show illiquidity, more so in 2019. If the company is going to see this for growth, new market, then it is wise to build up current assets or working capital. But if not, then the idle funds must be moved and used for profitable ventures or else profitability and return on the owner's investment will be adversely affected.
Current Ratio = Current Assets/Current Liabilities 2020 2019 13,896,794,073/13,864,318,289 = 1.00:1 12,703,448,506/13,706,759,724 = 0.93:1 This means that the business has P1.00 current assets to pay for a peso of a current liability in 2020 against P0.93 current assets to pay for a peso of current liability in 2019. The rule of thumb is 2:1. Both periods show illiquidity with 2019 showing it is very illiquid. Quick Ratio or Acid Test Ratio = Quick Assets / Current Liabilities 2020 2019 8,811,687,849/13,864,318,289 = 0.64:1 8,055,634,208/13,706,759,724 = 0.59:1 This means that the business has 0.64 quick assets to pay for a peso of current liability in 2020. Both periods show illiquidity, more so in 2019. If the company is going to see this for growth, new market, then it is wise to build up current assets or working capital. But if not, then the idle funds must be moved and used for profitable ventures or else profitability and return on the owner's investment will be adversely affected.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
NOTE: required interpretation. (Not sure in our interpretation)
Transcribed Image Text:Current Ratio = Current Assets/Current Liabilities
2020
2019
13,896,794,073/13,864,318,289 =
1.00:1
12,703,448,506/13,706,759,724 =
0.93:1
This means that the business has P1.00 current assets to pay for a peso of
a current liability in 2020 against P0.93 current assets to pay for a peso of current
liability in 2019. The rule of thumb is 2:1. Both periods show illiquidity with 2019
showing it is very illiquid.
Quick Ratio or Acid Test Ratio = Quick Assets / Current Liabilities
2020
2019
8,811,687,849/13,864,318,289 =
0.64:1
8,055,634,208/13,706,759,724 =
0.59:1
This means that the business has 0.64 quick assets to pay for a peso of current liability
in 2020. Both periods show illiquidity, more so in 2019. If the company is going to see this for
growth, new market, then it is wise to build up current assets or working capital. But if not, then
the idle funds must be moved and used for profitable ventures or else profitability and return on
the owner's investment will be adversely affected.
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