Current ratio and Quick ratio
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In Chater 29, Brealey explains how to use financial ratios to measure the financial performance of a company. He also discusses the effect of financial transactions on financial ratios. This is the question I need answered: If a company borrows a large sum of money from a bank, will the current ratio decrease or increase? When you discuss your answer, explain in detail how you arrived at your conclusion.
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Solution Summary
This provides the steps to calculate the Current ratio and Quick ratio
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A ratio is nothing more than a simple division of two numbers. Often numbers by themselves do not convey anything until they are related. It needs a contextual reference.
Our case of current ratio:
Current ratio is one of the liquidity ratio. Liquidity ratios ...
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