Staples Current Ratio

The current ratio is a very commonly used ratio that is useful for showing a company’s ability to cover its short-term obligations with its readily available assets. The more current assets the firm has in comparison to its current liabilities, the less of a risk that firm runs of defaulting on these payments when they come due. The actual ratio supposes that all current liabilities must be paid off immediately with the balance of current assets at that time. For this reason, it is very much desirable for a company to have a current ratio over 1 because anything less than one could mean that a firm could not meet its short-term obligations. In the graph above, Staples current ratio for the last five reporting periods for which data is available …show more content…
This is an important ratio for firms like Staples and Office Depot that have particularly large inventory balances at any given time. Because so much of these firm’s current assets is comprised of inventory, the quick ratio drops significantly from the current ratio. The quick ratio is one that must be compared on an industry by industry basis and, when compared to Office Depot, we can see that Staples is performing particularly well …show more content…
This marked decrease in debt-to-equity by Office Depot means either that the company either decreased its total asset balance over the period analyzed, or increased its equity. These insights into Office Depot yield insights for Staples as a major competitor. Staples was able to hold both ratios constant at about a 50/50 debt to equity balance while turning a profit in four out of the last five years. This indicates that, when compared to its major rival, Staples appears to have stricken an appropriate balance of financing for its