Southwest Airlines's Current Ratio

The current and quick ratio measures a firms ability to cover its current liabilities. As we can see from the equations to the right, the difference between the them is that the current ratio doesn't consider stock as a current asset as it is not always possible to turn stock into cash in a short amount of time. Ideally, a company should have a current ratio between 1.5 and 2 and a quick ratio that is above 1. As of the 3rd quartet of 2016, Southwest airlines has a current ratio of 0.57 and a quick ratio of 0.5. Which means its insolvent. If Southwest Airlines uses a vast amount of money in its dividend and share buyback program, then there is the risk that this will disturb the balance between the company’s currents assets and liabilities