Question

Current ratios among public corporations

Can you find the current ratio of a public company as well as the industry average? Indicate whether the company's ratio is strong or weak compared to the industry average. If you can also find an explanation of why the company has a better-than-average or worse-than-average ratio, that would be great, too.

Answer 1

Infosys Ltd. (INFY)

FYE- 31 march 2017

Current Ratio = Current Assets / Current Liabilities

Current Assets = 5,371 INR millions

Current Liabilities = 1,401 INR millions

Current Ratio = 5371 / 1401 = 3.83

Industry Average = 2.41

Infosys's ratio is strong as compared to industry average. Although it indicates the company may not be efficiently using its current assets or its short-term financing facilities as ratio is over 3. This may also indicate problems in working capital management.

The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. Acceptable current ratios vary from industry to industry and are generally between 1 and 3 for healthy businesses. The higher the current ratio, the more capable the company is of paying its obligations.,