Ms. Mary Brown is a credit rating analyst. She had prepared a detailed report on one of her client, FlyHigh
Airlines Ltd, a company operating chartered aircrafts in India. As she was heading for a meeting with her superior on the matter, coffee spilled over her set of prepared paper(s). As she was getting late for meeting, instead of preparing entire set she could recollect few numbers from her memory and reconstructed following partial financial table:
An analyst comparing two competitors Comp Systems and Big Tables gathers the data below:
Cash Conversions Cycle:
Comp Systems: 18 days and Big Tables 32 days
Defense Interval Ratio:
Comp Systems: 50 and Big Tables: 20
What can the analyst conclude regarding the liquidity of these companies?
A . Both indicators suggest that Comp Systems is more liquid than Big Tables
B . Both indicators suggest that Big Tables manages it/s cash better than Comp Systems
C . Both indicators give contradictory results
D . While Comp Systems is more liquid as per the Cash conversion cycle, Big Tables manages its cash better as indicated by a lower, hence better Defense Ratio
Answer: C
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