The document analyzes various liquidity ratios for a company from 2007-2011. It defines liquidity ratios as ratios that measure a company's ability to meet short-term debt obligations. It then calculates and interprets the current ratio, quick ratio, absolute liquid ratio, and inventory to working capital ratio for each year. The ratios show fluctuating trends over the years, with some ratios highest in 2008 and others lowest in 2007, indicating insufficient liquidity and an inability to meet short-term obligations based on standard thresholds.

1. BY:
JYOTSNA KUMARI
REG NO: 1261333028

2. LIQUIDITY RATIO
 Liquidity ratios are the ratios that measure the ability of a company to meet its
short term debt obligations. These ratios measure the ability of a company to
pay off its short-term liabilities when they fall due.
 The liquidity ratios are a result of dividing cash and other liquid assets by the
short term borrowings & current liabilities.
 The ratios under liquidity ratio are:
 Current ratio
 Quick ratio
 Absolute liquid ratio
 Inventory to working capital ratio

3. CURRENT RATIO
 An indication of a company's ability to meet short-term debt obligations.
 Higher the ratio the more liquid the company is.
 If current assets are more than twice of the current liabilities then it is
considered to have good short term financial strength and if current liabilities
exceed current assets then company may have problem to meet its short term
obligations.
 Formula:
 Current ratio=Current assets/Current liabilities

4. Year Current
Assets
Current
Liabilities
Current ratio
2011 1333.03 2216.96 0.601
2010 1094.70 1751.61 0.624
2009 903.36 1501.18 0.601
2008 836.86 1259.75 0.664
2007 678.69 1027.31 0.660

5. GRAPHICAL
REPRESENTATION
0.56
0.58
0.6
0.62
0.64
0.66
0.68
2011 2010 2009 2008 2007
currentratio
current ratio

6. INTERPRETATION
 To measure whether or not a company has enough resources to pay its debt
over the next business cycle, I have calculated the Current Ratio, which shows a
fluctuating trend of 0.60 in 2011 then 0.62 in 2010 and finally a slowdown from
0.66 in 2008 to 0.60 in 2009.Though the general rule is a company should have
neither more nor less liquidity rather a company should always have sufficient
liquidity and as we know that the Thumb Rule is 2:1 but the calculated Current
Ratios show an in-sufficient liquidity.

7. QUICK RATIO
 Measure of a company's liquidity and ability to meet its obligations.
 Also referred to as acid-test ratio and Liquid Asset ratio.
 Liquid asset means all current asset except closing stock and prepaid expenses.
 Formula: quick ratio = liquid assets/current liabilities.

8. Year Liquid Assets Current
Liabilities
Quick ratio
2011 598.99 2216.96 0.270
2010 518.75 1751.61 0.296
2009 404.62 1501.18 0.269
2008 401.95 1259.75 0.319
2007 277.47 1027.31 0c.270

9. GRAPHICAL
REPRESENTATION
0.24
0.25
0.26
0.27
0.28
0.29
0.3
0.31
0.32
0.33
2011 2010 2009 2008 2007
quickratio
quickratio

10. INTERPRETATION
 We have also calculated Quick Ratios to show a fluctuating trend and a decline
at the end of the year 2011. Though, the thumb rule is that companies with a
quick ratio of greater than 1.0 are sufficiently able to meet their short-term
liabilities but here the company has low Quick Ratio indicating the company’s
liquidity position is not good enough

11. ABSOLUTE LIQUID RATIO
 In addition to computing current and quick ratio, some analysts also
compute absolute liquid ratio to test the liquidity of the business.
 Absolute liquid ratio is computed by dividing the absolute liquid assets by
current liabilities.
 Formula: absolute liquid ratio = absolute liquid assets/current
liabilities.

12. Year Absolute Liquid
Assets
Current
Liabilities
Absolute Liquid
ratio
2011 227.21 2216.96 0.1024
2010 255.29 1751.61 0.1457
2009 155.59 1501.18 0.1036
2008 193.69 1259.75 0.1537
2007 37.76 1027.31 0.0367

13. GRAPHICAL
REPRESENTATION
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
2011 2010 2009 2008 2007
absl.Liquid ratio
absl.Liquid ratio

14. INTERPRETATION
 To check whether the liquidity position of the company is good or not we
have also calculated absolute liquid ratio and as we can see in every year
the absolute liquid ratio is lower than the thumb rule that is 1:2, so the
company’s liquidity position isn’t good.

15. INVENTORY TO WORKING CAPITAL RATIO
 Working capital is known as excess of current assets over current
liabilities.
 Formula: Inventory to working capital ratio =Inventory/working capital

16. INVENTORY TO WORKING CAPITAL RATIO
YEAR Inventory Working capital Inventory to working capital ratio
2011 734.04 -883.93 -83.04277488
2010 575.95 -656.91 -87.67563289
2009 498.74 -597.82 -83.42644943
2008 434.91 -422.82 -102.8593728
2007 401.22 -348.61 -115.0913628

17. -140
-120
-100
-80
-60
-40
-20
0
2011 2010 2009 2008 2007
Inventory toworking capital ratio
inventoryto w.c
ratio

18. INTERPRETATION
The company total liabilities is greater than the total assets.
So the working capital we are getting is in negative terms.
So the organisations performance is not good due to the lesser assets.

19. FINDINGS
 In current ratio, we have to find out current asets and
the current liabilities. In 2008, it is the highest as
compared to other years. But it remains same in 2009
and 2011.
 In quick ratio, we have to find out liquid assets and
current liabilities. In 2008, it is highest as compared to
other years . But it is lowest in 2007 and the ratio is
showing average in 2009, 2010 and 2011

20. Cont……
 In absolute liquid ratio, we need to find out theabsolute
liquid assets and current liabilities.
In 2008 , it is highest as compared to the other years.
It is average in 2011,2010,2009 and lowest in 2007
 In inventory to working capital ratio, we need to find out
the working capital which requires current assets value and
current liabilities value.
and inventory or closing stock.
As, current liabilities exceeds current assets, so it is showing
negative terms in all years.