How would a user know if a particular ratio demonstrates that a company is doing well or doing poorly? As an example to help exp

Question

stira [4]

2 years ago

10

How would a user know if a particular ratio demonstrates that a company is doing well or doing poorly? As an example to help exp

lain what I am asking, if a company has a Current Ratio calculated at 2.67. Is that good or bad? How would I know?

Business

1 answer:

Aleks04 [339] · Answer 1 · 2023-05-25T12:32:28+03:00

Answer: This can be explained as follows.

Explanation: A particular ratio can demonstrate the position of a company. For evaluating the position and position of a company the analyst should first compare the company with the industry average. The comparison with industry will imply whether company is in a surviving position or not.

Industry average may not give suitable results therefore comparison with core competitors should also be done.

A company having current ratio of 2.67 shows that such company have a sound financial condition as they have more than double of current ratios for paying their current liabilities .