Accounting quick ratio analysis.. plz help :D ?

the quick ratio of a compnay decreased from 1.66 to 1.41 .. during 2005-2006 ...
what do u conclude..??
quick ratio= cash+short-term investments+net current receivable/ current liabilities

It means the company's ability to meet day-to-day operating expenses and satisfy short term obligation as day become due has decreased.

The higher the quick ratio, the better it is. However, if the quick ratio is too high, it means that the company does not know how to fully utilise their asset to generate money. The company just lets the assets to "sit" there without doing any investment.

In this question, i conclude that the company's liquidity ratio has decreased. The company does not manage their asset that well or probably has more short term obligations. However, the company does not seem to face any financial distress in the year. In a nutshell, the company did better in year 2005 and compared to year 2006.

Hope this help!

It looks like you do all your homework's based on others people yahoo answers!...Hmm... you should try to do some work in your own!

Although, liquidity decreased slightly, it's still not in red-flag territory. A good rule of thumb for the quick ratio is this:

If the number is <1, that company might experience some liquidity difficulties - problems paying its bills.

>1 - good shape.

individual observation of the accounts is needed first before you can conclude anything... you must be able to point out what caused the change and try to comprehend the peculiarity revolving around the change.

if there is almost no change with the total "current" assets, it 'might' mean that the company's working capital is invested more in inventories. It might also mean that there is a nominal increase in borrowings, for example:
quick assets 5
current liabilities 2
quick ratio is 2.5
if the company will borrow, there would be a same increase to both current assets and current liabilities
quick assets 5+1 = 6
current liabilities 2+1 = 3
quick ratio is 2
--in that example there is a decrease to the ratio, without actually pinpointing to us that the company is actually facing any liquidity issues--