Favorable business conditions may bring about certain seemingly unfavorable ratios, and unfavorable business operations may result in apparently favorable ratios. For example, Sanchez Company increased its sales and net income substantially for the current year; yet, the current ratio at the end of the year is lower than at the beginning of the year. Discuss some possible causes of the apparent weakening of the current position, while sales and net income have increased substantially.

Favorable business conditions may bring about certain seemingly unfavorable ratios, and unfavorable business operations may result in apparently favorable ratios. For example, Sanchez Company increased its sales and net income substantially for the current year; yet, the current ratio at the end of the year is lower than at the beginning of the year. Discuss some possible causes of the apparent weakening of the current position, while sales and net income have increased substantially.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter7: Analysis Of Financial Statements

Section: Chapter Questions

Problem 3Q

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