Comment on the liquidity position of Microsoft using current ratio, quick ratio, and cash ratio for...

Comment on the liquidity position of Microsoft using current ratio, quick ratio, and cash ratio for 2020 only

Expert Solution

Current ratio of Microsoft in 2020= 2.5 times

Quick ratio of Microsoft in 2020=2.48 times

Cash ratio of Microsoft in 2020.= 2.25 times.

When we are looking at the the liquidity ratio of the Microsoft in 2020, it can be seen that the current ratio of the company is fairly acceptable as it is almost 2.5 times which is considered a good ratio as per the industry standards as its current assets were very higher than the current liabilities and it is having an adequate liquidity in it's hands as it can be seen in the case of quick ratio also and it is holding a very low amount of inventory in its hands so it is almost replicating the quick ratio with the current ratio.

The cash ratio of the company has also been astonishingly well because the company is having an adequate amount of cash in its hands & its cash is almost more than twice than its current liabilities so, the overall liquidity position of Microsoft is very sound and it is expected to be more sound in coming years as the cash flow of the company and the current assets of the company continue to grow.

jeff jeffy answered 2 years ago

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