3 times. The significance of the current ratio is that it highlights the risk involved, and the fact that the ratio has come down means that there is less cover to pay off debts, and hence the risk has increased. As risk increases, then it is pertinent to use a more sensitive measurement benchmark such as the quick or acid test. This measurement does not take into account the inventory as that takes time to sell and realise into cash, (Bazley and Hancock 2013, p 366). The quick ratio is 1.2 times, which is good as it shows the ability of the company to pay off its current debts is better than 1, but, it is still down from the previous year of 1.5 times and a little concerning. These ratios should ideally be compared to the industry averages to get a better understanding of how well the company is performing, however, for our purposes, a comparison of the two years shows a general decline in the company's ability to pay its debts. The cash flow from operations to current liabilities also shows a decline from 64 cents in 2013 to 26 cents in 2014.
Efficiency.
A company's efficiency ratios show how well it collects monies owing to it and its ability to convert this into sales. (Bazley and Hancock, 364) During 2014, debtors turnover was 4.6 times which means that the company was able to collect its debts every 79 days, during the previous period, the debtors turnover and average days uncollected was 5 times and 73 days respectively. It is difficult to know how well the company is performing in this area without knowing the terms it offers. For example, if it terms are 60 days then taking 79 days to collect is not that bad, however, if its terms were 30 days, then the fact that collection time has increased is a worrying sign that it is not very effective in collecting its debts owing. Inventory turnover and turnover in days respectively have improved remarkably over the two years with turnover increasing from 2.