SE10-10. Ratio analysis. (LO 3)
A 5-year comparative analysis of Low Light Company’s current ratio and quick ratio follows.
|
2004 |
2005 |
2006 |
2007 |
2008 |
|
|
current ratio |
1.19 |
1.85 |
2.50 |
3.40 |
4.02 |
|
Acid- test ratio |
1. i5 |
1.02 |
0.98 |
0.72 |
0.50 |
a. What has been happening to the liquidity of Low Light Company over the 5 years presented?
b. Considering both ratios, what does the trend indicate about what has happened to the makeup of Low Light’s current assets over the 5-year period?