Finance Cas Study

Short term solvency balances| Year 2008| Year 2009| Averages| | PM| flirt racket| REY| PM| skim| REY| (PM-BAT-REY)| Current balance| 1.472| 0.957| 1.28| 1.313| 1.172| 1.266| 1.243| rapid balance| 0.520| 0.600| 0.981| 0.490| 0.701| 0.985| 0.713| Cash balance| 0.151| 0.268| 0.663| 0.138| 0.320| 0.628| 0.361| NWC to TA ratio| 14.5| -1.394| 6| 10.14| 4.47| 6.4| 6.686| I- short solvency measures 1) Current ratio Current ratio = blow assets / current liabilities The current ratio is a measure of short-run liquid. It measures how quickly assets and liabilities empennage be converted to bills. To suppliers, a game ratio is a good indicator. To the firm however, a exalted current ratio indicates liquidity but can as well as indicate that short-term assets, primarily property are being used and invested poorly. A ratio of 1 and above indicates liquidity for a company. Philip Morriss (PM) current ratio is more or less eonian in the goal two yea rs, decreasing from 1.472 in 2008 to 1.313 in 2009. These values turn up plenteous liquidity and are a good take to potential investors. During the 2 years, PM cover all liabilities. Moreover, the current ratio for all years is not high enough for the company to be criticized for not flop managing accumulated cash.

The British American Tobacco company (BAT) has also seen an improvement in current ratio the last 2 years. In 2008, the ratio was of 0.957, meaning the firm failed to cover liabilities and was frankincense low in liquidity. It greatly improved in 2009 and managed to die hard a 1.172 ratio. Reynolds Inc. (REY) saw a little decrease in the ratio, expiry from 1.28 to 1. 266. The moderate value of this ratio shows ! reflects competent cash management and sufficient liquidity. We can conclude that all 3 companies depend liquid enough in 2009. However the BAT should be careful, as it didnt have good liquidity in 2008. 2) The quick (or Acid-test) ratio Quick ratio = (current assets...If you want to pull in up a full essay, order it on our website: OrderEssay.net

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