Crawford Company's current ratio for Year 2 was 1.42, which was slightly above the current ratio for similar companies in its industry. Crawford's quick ratio for Year 2 was 0.68, which is substantially lower than for similar companies in its industry. What conclusion would you draw based on this information?
What will be an ideal response?
Answers will vary
The primary difference between the current ratio and the quick ratio is that the current ratio includes inventories in the numerator, and the quick ratio does not. Therefore, based on this information, one might suspect that Crawford carries more inventory than other, similar companies. The managers of Crawford Company might want to examine the company's inventory and determine whether it could operate effectively with less inventory.
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