Abstract

Two students studying finance, were given an assignment by their professor to analyze the liquidity position of India-based telecom company Vodafone Idea Limited (VIL) for the financial years 2019-20 and 2018-19. In his briefing, the professor told them that the liquidity position of a company can be determined by analyzing various components of current assets and current liabilities. The students started identifying the current assets and current liabilities of VIL in order to analyze the short term liquidity of the company. However, after identifying and classifying the current assets and current liabilities, they were not clear how to go about determining the liquidity. They needed to understand the criteria to be considered and the process to be followed in determining the liquidity position of the company. The present case study can be helpful in discussing the concept of short-term liquidity, various ratios, and the criteria to be considered in analyzing and determining the short-term solvency of a company.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• The concept of liquidity analysis
• The application of liquidity ratios
• The short-term solvency of a company

Keywords

Vodafone-Idea; short-term liquidity; current ratio; quick ratio; cash ratio; current assets; current liabilities