SWM - Mark Moore

industry. This is accredited to the fact that Schweitzer-Mauduit does not fully compete in thetobacco industry. Most of their business is selling tobacco rolling paper and filters to the majortobacco firms. However, with new and much safer burning papers and filters, Schweitzer-Mauduit should expect growth of the current ratio in years to come.Quick Asset RatioThe quick asset ratio is very similar to the current ratio, however, inventories issubtracted from the current assets and then divided by current liabilities. By subtractinginventories, firms can focus more on their higher liquid current assets. Inventories are notconsidered a very liquid asset due to the fact they would have to be sold at a discount in orderto cover short-term liabilities. From the chart you can infer that by comparing the quick assetratio to the current ratio, the same patterns and trends occur across the industry. However,the chart also denotes that these firms would find it hard to meet its short-term liabilitieswithout selling inventories at a discount. Most of the companies operating in the industry haveover 50 percent of their current assets in inventory as tobacco. Since tobacco is a seasonalgrowing product, firms will have large amount of inventories when the growing season iscompleted, and must be able to store it for the remainder of the year. With the industriesoperating in several different atmospheres there is almost a constant inventory of tobacco forthe firms, making the level of inventory very constant, but necessary. Additionally, there is nota defined smoking season within the industry, which could create the inventory to slowlydeplete and be replenished throughout the year.105