In this assignment, you will review an article of your choice related to this module’s readings. Topics Covered · Liquidity and Industry Characteristics · Leverage and Growth Analysis · Cash Flow...

6/9/2017 Can A Company Pay Its Bills? Which Industries Have Strong Liquidity Ratios?
https://www.forbes.com/sites/sageworks/2014/12/07/can-a-company-pay-its-bills-which-industries-have-strong-liquidity-ratios/print/ 1/4
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Can A Company Pay Its Bills? Which
Industries Have Strong Liquidity
Ratios?
Mary Ellen Biery , Contributor
When a business offers credit to a favorite
customer, loyalty and the desire to make the sale
often play roles in the move. But one thing the
financial crisis taught American businesses is
that it’s important to spot signs of financial
sickness in transaction partners before that
sickness infects your firm.
After all, if a customer can’t pay its bills, your
firm could be left short on cash, too. Accounting
professionals, however, by a nearly 2-1 margin
have said clients don’t do nearly enough to
ensure creditworthiness of customers, vendors
and other potential partners before extending
credit, according to a survey by Sageworks, a
financial information company.
One way to assess the creditworthiness of
transaction partners is to evaluate key financial
metrics, such as the current ratio. The current
ratio is one way to assess whether a company can
meet its short-term obligations with what it has
on hand. The ratio compares current assets, or
assets that can quickly be converted into cash) to
current liabilities (or obligations due in the next
year) and indicates the firm’s liquidity, according
to Sageworks analyst Jenna Weaver. “It gives us
a measure of how liquid the company is,” Weaver
said.
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We write about private­company financial data and managing a business.
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