Ratio Trends
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Company "A" has the follwing ratios over 2 years:
Year 1 Year 2
Current ratio 0.88 0.87
Debt ratio 58.96% 57.28%
Return on Equity 19.98% 19.66%
Please state the trend of each ratio over the 2 years.
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Solution Summary
This solution shows the trend for each ratio over the two year period. A thorough analysis is provided.
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In this scenario, the current ratio has slightly decreased between the two years. In year two, the ratio of total assets to total liabilities was lower, which indicates that the liquidity of the company has decreased. This is typically due to acquiring additional short-term debt or a decrease in current assets. An increase would indicate a better financial position from a liquidity standpoint. Although in this case, the decrease is very slight so this trend would not be of ...
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