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+--- Thread: concept of Twist in Current Ratio? (/showthread.php?tid=10622)
concept of Twist in Current Ratio? - ArsalAnsari - 11-22-2011
any body have knowledge which level of current asset may be reduced if current ratio have reasonable level.
- nabeel_m9 - 11-28-2011
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by ArsalAnsari</i>
<br />any body have knowledge which level of current asset may be reduced if current ratio have reasonable level.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Assalam u Alaikum..
Dear Arsal..
Your question does not carry enough information to deliver the proper answer.
Current ration isnt a thing only related to all current assets and all current liabilities. Changing the current assets and more specifically some particular ones, will be a case-specific matter. There are many other factors that carry more importance than mere current ratio when we measure the liquidity of any company.
Normally a current ratio of 1.2 - 1.9 is considered reasonable. But you should also know the company's cash conversion cycle, quick ratio and the related financing factors to present a solid liquidity position.
You have asked about the reduction of current assets. A general solution may be to reduce the slow moving items to a level having 1.3 - 1.6 of the current ratio without impairing the quick ratio )
remember ...you have to consider all factors when changing a particular one so that you may not have any problems in other areas )
but if you can provide some details, it would be easier to provide you with a more suitable answer )
Regards
Nabeel Munawar