Selected financial ratios for Big Comfy Couch Incorporated are as follows: $\begin{array} { l l l }
&2021 & 2020 & 2019\\hline
\text{Current ratio} & 2.50 : 1 & 2.0 : 1 & 1.75 : 1\
\text{Accounts receivable turnover} &7 ~times &12~ times &18 ~times\
\text{Inventory turnover}& 9 ~times &9.1 ~times & 8.9~ times
\end{array}$
When assessing the above ratios on an overall basis, most analysts would conclude that the company's liquidity
A) improved.
B) declined.
C) remained unchanged.
D) cannot be determined from the information provided.

Question

Selected financial ratios for Big Comfy Couch Incorporated are as follows: $\begin{array} { l l l } 
&2021 & 2020 & 2019\\hline
\text{Current ratio} & 2.50 : 1 & 2.0 : 1 & 1.75 : 1\
\text{Accounts receivable turnover} &7 ~times &12~ times &18 ~times\
\text{Inventory turnover}& 9 ~times &9.1 ~times & 8.9~ times
\end{array}$
 When assessing the above ratios on an overall basis, most analysts would conclude that the company's liquidity
A) improved.
B) declined.
C) remained unchanged.
D) cannot be determined from the information provided.

Quizplus · Accepted Answer

The current ratio improved, but the accounts receivable turnover declined significantly, indicating slower collection of receivables, which negatively impacts liquidity.

Selected Financial Ratios for Big Comfy Couch Incorporated Are as Follows