Answer to Question #189922 in Financial Math for Nachiket Pawar

Question

The following information is given with respect to the ratio's of two companies

Aman Ltd Roger Ltd

Current ratio 2:01 1.60:1

Quick Ratio 1.35:1 1:01

Return on investment 15% 13%

Debt Equity Ratio 2.5:1 1:01

a. Define the concepts of Current and Quick ratio’s and also, reflect on your understanding

towards the financial performance of the companies by looking to the above information

(2marks for defining and 3 marks for interpretation and reasoning).

I want elaborated answer of this question

Answer 1

a) Current Ratio and Quick Ratio are liquidity ratios

Current Ratio = Current Asset / Current Liability

Standard Current Ratio = 2

Quick Ratio = Quick Asset / Current Liability

Standard Quick Ratio = 1

In there Aman Ltd is Better than Roger Ltd because both Current and Quick Ratios are higher than Roger Ltd.