Explore BrainMass

Financial Statement Analysis

1. "The current ratio is preferred over the quick ratio when assessing a company's liquidity. Since these two ratios move in tandem (that is, if one goes up, the other goes up), computing the quick ratio is redundant." Do you agree or disagree? Why?

2. Overall, would a company rather have a longer or a shorter operating cycle? Why? What actions could a company take to either lengthen or shorten its operating cycle?

No minimum word count required.

Solution Preview

1. I disagree with the statement. Current ratio and quick ratio may not move in tandem. Quick ratio is a more stricter version of the current ratio and takes out inventories from the numerator. It is very likely that a companies current ratio improves (with a reduction in inventory) and there is no reduction (or even an increase) in ...

Solution Summary

The solution does a great job of explaining the answer. The solution is very well written and easy to follow along and clearly explains the process in a simple way. Overall, a great response to the question being asked.