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A firm's current ratio has steadily increased over the past 5 years, from 1.9 to 3.8. what would a financial analyst probably conclude from this information?

Sagot :

A financial analyst would conclude the firms' liquidity position probably has improved.

What is the significance of liquidity position?

Liquidity position refers to the ability of the company to raise cash when it needs it. It refers to both an enterprise's ability to pay short-term bills and debts to raise quick cash.

The liquidity ratio of a company analyze the stability of the firm and tells the investors or creditors the company has enough assets to combat any tough times.

The formula for calculating the liquidity ratio of the company is Quick Ratio = Current Assets - Inventory/Current Liabilities.

Learn more about liquidity position here:-

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