Generally, the higher the variety of days outstanding, the greater the chance of delinquencies in accounts receivable. A comparability of this ratio may point out the extent of a company’s control over credit score and collections. However, corporations inside the identical industry could have different terms provided to prospects, which must be thought of. This ratio is a rough Menards Truck Rental indication of a firm’s ability to service its current obligations. Generally, the upper the current ratio, the greater the “cushion” between present obligations and a firm’s ability to pay them. While a stronger ratio shows that the numbers for current assets exceed those for current liabilities, the composition and high quality of present belongings are crucial factors in the analysis of an individual firm’s liquidity.
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