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Cash Ratio

In: Business and Management

Submitted By kifyantobe
Words 1274
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1. Cash ratio measures how much total company’s cash market security and account receivable are available to pay its current liabilities. The cash ratio of Moro ltd compared to the average of the industry is better because the minimum is 2:1 and the higher the better, but the industry has 1:8:1 compared to that of Moro ltd 6:1. This means that Moro Ltd has 6 TZS for responding to each 1 TZS of its current liabilities, while the average of the industry implies that for each 1 TZS of current liabilities an industry can respond with 1.8 TZS cash. Also the cash ratio of Moro ltd compared to that of the performer in industry is not good because Moro ltd has more cash in hand after responds to its current liabilities which had to be invested so as to generate revenue.

2. Cash conversion cycle expresses the length of time in days, that it takes a company to convert resource inputs into cash flows. The cash conversion cycle of the Moro Ltd compared to the average of the industry is poor because the company takes more than 35 days of the average of the industry to convert resource inputs into cash flows. Also, the cash conversion cycle of the Moro Ltd compared to that of the best performer in the industry is not good because the best performer in the industry takes few days (30 days) compared to that 40 days that Moro Ltd takes to convert resource inputs into cash flows.

3. Account Receivable Turnover measures how quickly/often the firm sells on credit as well as collecting debts. The firm which sells more quickly/often on credit performs better. Therefore the account receivable turnover of Moro Ltd compared to the average of the industry is poor because Moro Ltd sells on credit 20 times while the average of the industry sells on credit is 30 times. Also the Accounts Receivable Turnover of…...

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