What counts as a good current ratio will depend on the company’s industry and historical performance. In this example, although both companies seem similar, Company B is likely in a more liquid and solvent position. An investor can dig deeper into the details of a current ratio comparison by evaluating other liquidity ratios that are more narrowly focused than the current ratio. In the first case, the trend of the current ratio over time would be expected to harm the company’s valuation.
- In the SLR, the impact that others have on CR is particularly noticeable in the supply chain context.
- This process ensured consistency in the classification of articles, suitable for further analysis.
- Good CR/CSR reporting should offer a true reflection of your organisations, it’s culture and values and realistically discuss the challenges as well as the opportunities in front of it.
- First, the trend for Claws is negative, which means further investigation is prudent.
- The dimensions of CR displayed in Table 3 represent an additional pillar of CR that must be included in a holistic discussion of CR today.
In theory, the higher the current ratio, the more capable a company is of paying its obligations because it has a larger proportion of short-term asset value relative to the value of its short-term liabilities. Current assets listed on a company’s balance sheet include cash, accounts receivable, inventory, and other current assets (OCA) that are expected to be liquidated or turned into cash in less than one year. In the SLR, the impact that others have on CR is particularly noticeable in the supply chain context.
Examples of Debits and Credits
This is not surprising, as it is very difficult to collect reliable data along supply chains. When supply chains span the globe, data collection is especially challenging, as the chain consists of multiple suppliers and subcontractors, positioned at different tier levels. Recognizing this, the paper examines firstly the current state of CR research through a systematic literature review from a business perspective. The review is combined with a bibliometric mapping approach to show the most influential research clusters, representative of CR research streams and their contributors.
Overall, the two coders identified and agreed on over 583 text passages suitable for the next stage of coding. A debit reflects money coming into a business’s account, which is why it is a positive. One limitation of the current ratio emerges when using it to compare different companies with one another. Businesses differ substantially among industries; comparing the current ratios of companies across different industries may not lead to productive insight. The current ratio is most useful when measured over time, compared against a competitor, or compared against a benchmark.
For example, in one industry, it may be more typical to extend credit to clients for 90 days or longer, while in another industry, short-term collections are more critical. Ironically, the industry that extends more credit actually may have a superficially stronger current ratio because its current assets would be higher. A ratio under 1.00 indicates that the company’s debts due in a year or less are greater than its assets—cash or other short-term assets expected to be converted to cash within a year or less.
Historically, many prominent theoretical contributions come from game and signaling theory (Fombrun & Shanley, 1990; Rindova et al., 2005; Veh et al., 2018). This emphasizes that CR serves as a signal of a firm’s credibility attributes, products, or services (Saxton, 1998; Shapiro, 1983). In addition, Weigelt and Camerer (1988) connect game and signaling theory and outline how reputation can emerge from the past actions and behaviors of a firm.
The extracted sections and definitions identified by both coders were then compared. For 37 text phrases where the two coders disagreed, they reached agreement through a negotiation process. In eight cases, the two could not come to an agreement, so these text passages were discarded and not considered further in the process.
If a company’s current ratio is less than one, it may have more bills to pay than easily accessible resources to pay those bills. For example, a normal cycle for the company’s collections and payment processes may lead to a high current ratio as payments are received, but a low current ratio as those collections ebb. Calculating the current ratio at just one point in time could indicate that the company can’t cover all of its current debts, but it doesn’t necessarily mean that it won’t be able to when the payments are due. Public companies don’t report their current ratio, though all the information needed to calculate the ratio is contained in the company’s financial statements.
CR and Its Connection to Supply Chain Aspects
In the wake of the controversy, several institutional investors sold their shares, denting Boohoo’s share price. PricewaterhouseCoopers (PwC) quit as its auditor and other leading accountancy firms ruled out working with the retailer. This paper addresses two major research gaps regarding the interplay between supply chain management (SCM) and CR research. The first gap originates from the traditionally separated fields of CR and supply chain research, which have been treated as two different units of analysis, often in isolation and without understanding the linkages between them (Blom & Niemann, 2022). The second gap concerns the absence of a research agenda connecting these two fields of research, including the most pressing topics to be explored.
Think of these as individual buckets full of money representing each aspect of your company. We divide the research questions into ten different themes, indicating distinct research directions. The supply chain section, for example, focuses on how CR originates and develops along the chain and, thus, affects the reputation of individual chain members (Manello & Calabrese, 2019). In addition, questions arise as to what extent reputational effects result from a crisis in the supply chain and how the CR of other chain members could be affected (Lemke & Petersen, 2018; Tannous & Yoon, 2018). As Table 2 shows, Cluster 1 has a greater CSR focus which we also find in the theories applied.
Cr Business English
This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional. Having an outside organisation review and report on your CR/CSR activities can help not only enhance the quality and veracity of your report, but may also pick up areas, themes and opportunities that have not been recognised. Good CR/CSR reporting should offer a true reflection of your organisations, it’s culture and values and realistically discuss the challenges as well as the opportunities in front of it. Any information you provide, particularly performance statistics and statements should be open to scrutiny, verifiable and accurate.
A current ratio of less than 1.00 may seem alarming, although different situations can negatively affect the current ratio in a solid company. Researchers from Cluster 2—Empirical Perspective emphasize that the development of reputation in the supply chain warrants further investigation (Karamchandani et al., 2021; Mani & Gunasekaran, 2021; Nurchayati et al., 2020). Specifically, questions arise regarding the impact of crises on CR and on the supply chain (Coombs & Laufer, 2018; Gomez-Trujillo et al., 2020).
Your Ultimate Cheat Sheet to Deciphering the 123 Most Common Business Acronyms
The integrative school of thought regards CR as the expectation of stakeholders toward the company’s future actions to secure CSR aspects as well as to show true engagement in sustainability along their corporate value chain system. In this sense, CR is not merely backwards oriented—it is rather the trust that stakeholders place in companies when it comes to fulfilling their promises and adhering to the values they communicate. Since the late 2000s, climate, environmental, and sustainability factors have increased the pressure for companies to focus more on conservation aspects of their CR. Additionally, Dahlmann and Roehrich (2019) point out that the engagement of an organization with its partners along its supply chains is crucial for the development of long-term sustainability and to ensure green and sustainable supply chains in the future. CR is an important concept, affecting value creation and destruction along supply chains.
We believe that this understanding must be included in a modern and consolidated version of CR. Thus, a theoretical model should reflect the dimensions of CR to meet the requirements of contemporary and preventive reputation management in the stakeholder environment of any business organization. Authors from the Differentiated School of Thought consider CR and corporate image as two different but interrelated theoretical concepts. While, secondly, CR is influenced by multiple images perceived by a company’s stakeholders.
Keywords
This dovetails with a need for work on how stakeholders’ judge the sincerity of a corporation’s social and ethical pronouncements. The dimensions of CR displayed in Table 3 represent an additional pillar of CR that must be included in a holistic discussion of CR today. Regarding the dimensions, we further developed an idea of a Consolidated School of Thought from our historical analysis of CR (see Fig. 3b). This school views CR on a broader canvas—one that is embedded in the stakeholder environment, framed by the dimensions derived from our research.
Thus, it is difficult to mitigate reputational risks in supply chains that are globally dispersed. Rajagopal et al. (2021) and Rajagopal et al. (2017) introduced the idea of looking at risk drivers from upstream and downstream supply chain partners, arguing that reputational risk is clearly overlooked in the supply chain literature. In addition, Dhingra and Krishnan (2021) explored social and environmental reputation costs along the supply chain and identified the importance of reputational risk sharing between supply chain partners. They highlight the best guide to bookkeeping for nonprofits the lack of research in a supply chain context regarding reputation risk management and call for research to identify ways of substantially reducing reputational risks in supply chain settings. Mani and Gunasekaran (2018) echo these concerns, exploring how ethical behaviors and actions along global supply chains affect firm reputation. Their research highlights a need for further investigation of the role of reputation mechanisms in supply chain networks, influencing ethical and social actions, upwards and downwards the supply chain.
However, the company’s liability composition significantly changed from 2021 to 2022. At the 2022, the company reported $154.0 billion of current liabilities, almost $29 billion greater than current liabilities from the prior period. This website is using a security service to protect itself from online attacks. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data.