Question

Intrepret and explain in detail why Tesla' current ratio between 2013-3017 are as follows:

Year Current Ratio

2013 1.88%

2014 1.51%

2015 0.99%

2016 1.07%

2017 0.86%

Answer 1

Current Ratio= Current asset/current liabilty

It meassure the ratio of current asset to current liability.

Current ratio indicate the ability of firm to meet its short term obligation.

An ideal current ratio is 2:1

That means for every $ 1 doller current liability there should be at least $ 2 current liability.

Interpretation:

2013: 1.88

It indicate there $1.88 current asset for every $ 1 current liability.this ratio nearby ideal current ratio. It seems good.

2014 : 1.51

This ratio also satisfactory because there is $ 1.5 for every $ 1 liability, that means company can meet its obigation without much risk. However this ratio is not par with ideal current ratio

2015:0.99

This indicate that current liability is more than current liability. It may difficult to meet its short term payment.

2016: 1.07

It indicate current asset and current liability are almost same propotion,howevercurrent asset have a slight more value.

2017:0.86

This indicate a bad short term ability to meet its payment and other obigation.