because we limit queries to 32 words.
Did you mean: The following information is given with respect to the ratios of two
companies: Aman Ltd Roger Ltd Current ratio 2:01 1.60:1 Quick Ratio 1.35:1 1:01
Return on invest 15% 13% Debt Equity Ratio 2.5:1 1:01 1. Define the concepts of
Current and Quick ratios and also, reflect on your understanding towards the
financial performance of the companies by looking to the above information
Answers
Current Ratio and Quick Ratio
Current Ratio
The current ratio is a liquidity ratio that assesses a company's capacity to pay short-term or one-year obligations.
Current Ratio = Current Asset / Current Liability
Standard Current Ratio = 2
Quick Ratio
The quick ratio, often known as the acid-test ratio, is a form of liquidity ratio that assesses a company's capacity to promptly extinguish or retire current liabilities using near cash or quick assets.
Quick Ratio = Quick Asset / Current Liability
Standard Quick Ratio = 1
Explanation:
(1) In there Aman Ltd is Better than Roger Ltd because both Current and Quick Ratios are higher than Roger Ltd.
(2) Return on Investment = Net Income / Investment
In there Aman Ltd is Better than Roger Ltd because ROI is greater than Roger Ltd
Debt to Equity Ratio = Total Debt / Equity
A Lower Debt to Equity Ratio Means Risk is also Lower because There using lower debt compared to equity thus Roger Ltd has less risk than Aman Ltd.
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