Question

Please compare 5 years ratio and analysis each ratio which is better and reasons.

Brahim's Holdings Bhd BRAHIMS (Malaysia)		2013	2014	2015	2016	2017
Liquidity	Current Ratio=Current Asset/Current Liability
	Current Assets	147,717.90	126,933.70	91,215.30	103,387.00	98,028.00
	Current Liabilities	157,966.20	112,664.80	103,111.60	62,378.00	59,232.00
	Current Ratio(times)	0.94	1.13	0.88	1.66	1.65
	Quick Ratio=(Current Assets-Inventories)/ Current Liability
	Inventories	7,350.90	7,525.30	7,066.80	6,126.00	6,259.00
	Quick Ratio(times)	0.89	1.06	0.82	1.56	1.55

Answer 1

Given,

YEAR	2013	2014	2015	2016	2017
Current Ratio	0.94	1.13	0.88	1.66	1.65
Quick Ratio(times)	0.89	1.06	0.82	1.56	1.55

Current Ratio:

It identifies whether a company's current assets are able to meet its current liabilities or not.

• If the current ratio is more than 1, it reflects that the current assets are able to meet current liabilities.
• If the current ratio is less than 1, it reflects that the current assets are not able to meet the current liabilities.

The idealistic current ratio is 2. Because if the ratio is more than 2 it means that the company is keeping its assets idle.

Among the 5 years, current ratio in 2014, 2016 and 2017 is more than 1, which means the company is having enough current assets to repay its current liabilities. But in 2016 the ratio is 1.66, the highest among all.

Quick Ratio:

It identifies, how quickly the company can liquidate its current assets to pay current liabilities.

• If quick ratio is more than 1, it indicates that company has more cash.
• If Quick ratio is less than 1, it indicates that company is not having enough liquid assets.

Among the 5 years, quick ratio in 2014, 2016 and 2017 is more than 1, which means the company is having enough current assets to repay its current liabilities. But in 2016 the ratio is 1.56, the highest among all.

After comparing the two ration it is clearly proves that current ratio and quick ration of 2016 is better when compared to other years.