Sydney Pty Ltd Ratios

SYDNEY PTY LTD RATIOS - SOLUTIONS (a) i) The liquidity of Sydney Pty Ltd is measured by two proportionalitys: veritable and wide awake ratio. Current ratio measures the ability to cover short- barrier debts with online assets. This ratio increase from 2 to 3 between 2009 and 2010 masking piece an improvement in liquidity but falling exterior of the ideal range (1 to 2). This movement could indicate an increase in some types of current assets which were less liquid e.g. accounts receivable or memorial. The quick ratio measures the ability to meet short term obligations with the most liquid assets excluding inventory and prepayments. This ratio also increase between 2009 and 2010 from 1 to 1.3 indicating an improvement in liquidity. Liquidity remained at heart the ideal range of 1 and 2. The two ratios back that a lot of current assets are tied up in inventory which may come at a monetary value (e.g. storage costs or obsolescence). (3 marks) ii) The positivity of Sydney Pty Ltd is measured through the net profit margin ratio. This ratio increased by 3 percent between 2009 and 2010 exhibit a sharp improvement in profitability.

Without each produce about earthy profit margin or former(a) profitability ratios, it is ambitious to assess the reason for the change, perhaps in that respect was an increase in revenues or a decrease in expenses. (3marks) iii)Two ratios utilize to measure the efficiency of the society are inventory overthrow and debtors turnover. It took 40 days longer for the company in 2010 to contend its inventory compared to 2 009 showing deterioration in efficiency. In ! accompaniment an increase in debtors turnover shows that it took on mediocre 15 days longer for customers to pay in 2010 compared to 2009. Without any information about industry averages it is difficult to estimate if the company was efficacious in managing its debtors and inventory. The entity may have to review its debtors assembly policy, creed terms offered to customers and its...If you want to get a profuse essay, entrap it on our website: BestEssayCheap.com

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