Question

Why is current ratio and operating margin ratios important in business?

Answer 1

Current ratio = Current assets / current Liabilities

Current ratio is the part of liquid ratio which means how frequently the current liabilities can be paid with the current assets available. it is very important as the current ratio depicts how good operations are for business. standard current ratio should not be less than 2:1

Operating margin ratio = Operating profits / net sales

operating margin ratio tells us what is the exact profit from the operations of business it does not include the non operating items and it is important as the percentage tells us how well the business is operating