Understanding Quick Ratio and Gross Profit Margin for Retail

Week 05 Discussion 1.I shared this assignment with my husband. We went through all of the ratios and discussed what we learned from them and how they would be helpful to a retail business owner or investor. 2.During our discussion, the Quick Ratio became much clearer to me. I didn't know what a good number would be so I googled it. A company with a quick ratio of 1 or higher is liquid. So for ABC Widgets, January (2.04) and March (1.44) were good months, but February (.07) was not. I believe it relates to how long a company can pay it's bills if no other revenue is received. In January they had enough to cover expenses for 2 months, which helped cover them in February. In March, they were becoming more liquid. 3.We discussed ways that they could improve their ratios, either by cutting costs, reducing expenses, or raising the price of the widgets. We also looked at the Gross Margin Profit which went up each month. We guessed that production of the widgets was getting more efficient and the percentage of profit was able to go up. 4.We questioned what they might be doing as a company to change their ratios. As we looked at all of the numbers, it wasn't clear what was making the difference in their cash and accounts receivable. 5.I would like to learn more about the Quick Ratio and the Gross Profit Margin. We have a small business with no investors so we try to keep our profits around zero for tax reasons. These ratios would be helpful to us as we make decisions about hiring new employees and buying equipment.