Title

Teaching Current and Quick Ratios Rules of Thumb

Document Type

Article

Publication Date

2004

Publication Source

AIR Newsletter: Accounting Instructors' Report

Volume

2004

Issue

Spring

Inclusive pages

N/A

Publisher

GALE Cengage

ISBN/ISSN

2325-0267

Peer Reviewed

yes

Abstract

This paper critiques the teaching of the 2:1 and 1:1 rules of thumb for the current and quick ratios, respectively, in introductory accounting courses. These ratios are calculated for 38 industries and tested for significant differences from the rules of thumb. Of the 38 industries examined, 20 had current and quick ratios that were significantly different from the rules of thumb. The paper includes tables suitable for distribution to students to promote discussion about using industry averages rather than solely relying on rules of thumb when analyzing the financial position of a company.

Keywords

slabaugh, pollock, schmelzie, accounting, instructors, instruction, quick ratios

Disciplines

Accounting

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