The Solvency Of Cisco Systems Inc. Essay
To understand and measure the overall solvency of Cisco Systems Inc., One needs to analyze its financial ratios. Besides lenders and potential investors rely on such information for making decisions.
This first ratio or financial metric is used to determine if the firm is in the position to pay off its short-term solvency or obligations. In regards to this, one needs to first consider its current ratio. In 2013 the current ratio was 2.9 times, increased to 3.4 times in 2014 signifying an increase in its current assets, then to a slight decline at 3.2 times in 2015 which indicates an ok margin of safety for Cisco. This is a valid indication of a well company. This means the company is able to turn its short term assets readily into cash to pay off its debts. To substantiate that Cisco Systems is a financial healthy firm, we also look at its quick ratios and cash rations over the three years. The quick ratio is more concerned about cash and marketable security with the exclusion of the firms inventories. The quick ratio in 2013 was 2.9 and increased over the years to 3.16 in 2015 indicating a value grater than 1of current liability signifying that the company is in a better state of liquidity. Below is a table depicting the calculations of the various ratios. 2013 2014 2015 current assets $ 65,521,000 67,114,000 76,283,000 current liabilities $ 21,996,000 19,809,000 23,623,000 current ratio 2.978768867…