The Current Ratio and Quick Ratio for the Food Retailing

question 9

Essay

The current ratio and quick ratio for the food retailing industry are typically the lowest ratios when compared to the same ratios of other industries.Does this mean the food retailing industry is illiquid? What factors could lead to the low ratios? (Be specific to the industry.)

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Definitions:

Ending Inventory

The total value of all inventory in stock at the end of an accounting period, calculated before new inventory purchases are added.

Lower Of Cost

An accounting principle where the inventory is recorded at either its historical cost or market value, whichever is lower, to report assets conservatively.

Total Inventory Value

The total cost of all items held in inventory by a business, calculated at a specific point in time.

Net Realizable Value

The projected price at which goods are sold, minus the expenses associated with their sale or disposal.