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Liquidity ratio :

Liquidity is the ability of a business to meet the short term obligations when they

fall due. An enterprise should have enough cash and other current assets which can

be converted into cash so that it can pay its suppliers and lenders on time .

a> Current Ratio : This is the ratio of current assets to current liabilities . it is

widely used indicator of a company’s ability to pay its debt in short term. It

shows the amount of current a company has per rupee of current liability .

Current ratio = Current assets

Current liabilities

Comparison of Industry to firm:

 Tea industry to B&A ltd : While comparing the current ratio of FY 2009 Tea

industry’s was .762 and the current ratio of B&A ltd was .7161 . If we

compare the ratio we don’t find much of a difference between the two.

Both the ratio lies between the .7 mark this means the company’s and the

industry’s ability to pay the debt in short term was the same for the FY

2009. This also tells us that the liabilities are more in comparison to the

assets of the company and the industry. According to the thumb rule the

current ratio is expected to be at least 2:1 . So both company’s and

industry both liabilities are more than assets and the investors will think

before investing in the company or industry.

 Tea industry to Ananda Bag tea : While comparing the current ratio of FY

2009 Tea industry was .762 and the current ratio of Ananda bag tea was4.67. If we compare th.e ratio we find that the company’s ratio is very

good in comparison to the industry ratio. The Ananda bag tea company

has more assets that its liabilities because its ratio is 4.67. The company’s

ability to pay the short term debt is more in comparison to the industry’s

ability . So the investors will be ready to invest in the company.

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 Tea industry to Assam company : While comparing the current ratio of FY

2009 Tea industry was .762 and the current ratio of Assam company was .

9711. If we compare the ratio we find that the company’s ratio is higher

than the industry’s ratio . If we simply take the company’s ratio its not

that good because according to the thumb rule the ratio should be 2:1. So

its hard to say wether a investor will invest in the company or industry ornot.

Comparison between Firm’s:

When we compare between the firms the Assam company has current ratio

of .9711, B&A company has current ratio of .762 and the Ananda bag tea

company has current ratio of 4.67.

Looking at the ratio’s the Ananda bag tea has the best ratio in comparison to

the other two companies , the next ratio that we can consider is of Assam

company. The worst ratio is of B&A co. in comparison to the other two

companies.

b>Quick Ratio: The cash is readily available to make payment to supplier and

the debtors can be quickly converted into the cash. In Quick ratio inventories

are not taken into consideration.

Quick ratio= Quick Assets

Current Liabilities

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Comparison of Industry to Firm:

 Tea industry to B&A ltd : while comparing the ratio of tea industry withthe B$A ltd the quick ratio of tea industry is .313 and the quick ratio of 

B$A ltd is .460 the difference is not much but after analyzing the data

it can said that the firms quick ratio is more in comparison to the

industry . This means that the firm has more liquid assets in

comparison to the industry to pay the current liabilities or obligation .

But if we see in total the firm’s ratio is also not good because its ratio

is less than 1 means it has less liquid assets than current liabilities.

Tea Industry to Ananda Bag Tea: While comparing the ratio of tea

industry with the Ananda Bag tea the quick ratio of tea industry is .313

and the quick ratio of Ananda tea bag is 1.77 . When the comparison is

made between the firm and the industry the industry has better ratio .

 The company is in a position to pay the current liabilities and has more

of liquid assets in hand than its current liabilities.

 Tea industry to Assam Company : While comparing the ratio of tea

industry with the Assam company the quick ratio of the tea industry is .

313 and the quick ratio of the Assam company is .797 . When the

comparison is made between the two the firm ratio is better than the

industry ratio. It implies that the company is in the better position to

pay its current liabilities in comparison to the industry. But thecompany’s ratio is also not good because it is below 1 so it means it

has less liquid assets to pay its current liabilities.

Comparison between the Firms:

When the comparison is made between the firms, the quick ratio of Ananda

company is 1.77 , ratio of Assam company is .797 and the ratio of B$A ltd is .460

.When analyzing the data we find that the ratio of Ananda company is best becauseits quick ratio is more than 1 it means that it is in position to pay the current

liabilities . The next company is Assam company its quick ratio is .797 which is

better than the ratio of B$A ltd which is .460.