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A liquidity ratio that measures a company's ability to pay short-term obligations.The Current Ratio formula is:
So in case of retail business there are some assumptions as the following:-
1- The inventory cycle should be short according to the nature of these products so the retailers always need to keep their stock volumes in the minimums level.
2- The retailers always negotiate to get the credit policy for the payments very long as possible
so it will get the account payable balance bigger than the account receivable balance
According to the above the current assets value will be smaller than current liabilities so
The less than1 current ratio is comparatively acceptable in retail business
By simple way: Because the (Activity Cycle) trade cycle is very short
In some industries, current ratio of lower than1 might also be considered acceptable. This is especially true of the retail sector which is dominated by giants such as Wal-Mart and Tesco. This primarily stems from the fact that such retailers are able to negotiate long credit periods with suppliers while offering little credit to customers leading to higher trade payables as compared with trade receivables. Such retailers are also able to keep their own inventory volumes to minimum through efficient supply chain management
In some industries, current ratio of lower than1 might also be considered acceptable. This is especially true of the retail sector which is dominated by giants such as Wal-Mart and Tesco. This primarily stems from the fact that such retailers are able to negotiate long credit periods with suppliers while offering little credit to customers leading to higher trade payables as compared with trade receivables. Such retailers are also able to keep their own inventory volumes to minimum through efficient supply chain management - See more at: http://accounting-simplified.com/financial/ratio-analysis/current.html#sthash.T4Hlt0gF.dpuf In some industries, current ratio of lower than1 might also be considered acceptable. This is especially true of the retail sector which is dominated by giants such as Wal-Mart and Tesco. This primarily stems from the fact that such retailers are able to negotiate long credit periods with suppliers while offering little credit to customers leading to higher trade payables as compared with trade receivables. Such retailers are also able to keep their own inventory volumes to minimum through efficient supply chain management - See more at: http://accounting-simplified.com/financial/ratio-analysis/current.html#sthash.T4Hlt0gF.dpuf In some industries, current ratio of lower than1 might also be considered acceptable. This is especially true of the retail sector which is dominated by giants such as Wal-Mart and Tesco. This primarily stems from the fact that such retailers are able to negotiate long credit periods with suppliers while offering little credit to customers leading to higher trade payables as compared with trade receivables. Such retailers are also able to keep their own inventory volumes to minimum through efficient supply chain management - See more at: http://accounting-simplified.com/financial/ratio-analysis/current.html#sthash.T4Hlt0gF.dpuf In some industries, current ratio of lower than1 might also be considered acceptable. This is especially true of the retail sector which is dominated by giants such as Wal-Mart and Tesco. This primarily stems from the fact that such retailers are able to negotiate long credit periods with suppliers while offering little credit to customers leading to higher trade payables as compared with trade receivables. Such retailers are also able to keep their own inventory volumes to minimum through efficient supply chain management - See more at: http://accounting-simplified.com/financial/ratio-analysis/current.html#sthash.T4Hlt0gF.dpuf In some industries, current ratio of lower than1 might also be considered acceptable. This is especially true of the retail sector which is dominated by giants such as Wal-Mart and Tesco. This primarily stems from the fact that such retailers are able to negotiate long credit periods with suppliers while offering little credit to customers leading to higher trade payables as compared with trade receivables. Such retailers are also able to keep their own inventory volumes to minimum through efficient supply chain management - See more at: http://accounting-simplified.com/financial/ratio-analysis/current.html#sthash.T4Hlt0gF.dpuf In some industries, current ratio of lower than1 might also be considered acceptable. This is especially true of the retail sector which is dominated by giants such as Wal-Mart and Tesco. This primarily stems from the fact that such retailers are able to negotiate long credit periods with suppliers while offering little credit to customers leading to higher trade payables as compared with trade receivables. Such retailers are also able to keep their own inventory volumes to minimum through efficient supply chain management - See more at: http://accounting-simplified.com/financial/ratio-analysis/current.html#sthash.T4Hlt0gF.dpuf
