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OklaBoston (53.12)

Quick Ratio questions



November 11, 2015 – Comments (2)

How many Fools believe, as I am coming to, that a quick ratio below 1.0 indicates a company too willing go into debt to fund operations, while a quick ratio higher than 2.0 indicates a company too UNWILLING to take risks?

Should the latter variety either increase it's dividend, spend more to enhance growth prospects, or both? 

2 Comments – Post Your Own

#1) On November 11, 2015 at 6:46 PM, OklaBoston (53.12) wrote:

An exception that came to mind after I posted the above. 

 If a company gets new management, and the new management thinks the company is already too deep in hock than keeping the QR above 2 for a while as a by-product of striving to reduce the D/E ratio would be okay.  



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#2) On November 12, 2015 at 7:23 PM, constructive (99.98) wrote:

Not a bad rule of thumb, but it depends on the industry. Different industries have different working capital needs.

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