Sydney Pty Ltd Ratios

SYDNEY PTY LTD RATIOS - SOLUTIONS (a) i) The liquidity of Sydney Pty Ltd is measured by two dimensions: veritable and alert ratio. Current ratio measures the ability to cover short- barrier debts with actual assets. This ratio increase from 2 to 3 between 2009 and 2010 test an improvement in liquidity but falling outside(prenominal) 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 archive. The quick ratio measures the ability to meet short terminus obligations with the most liquid assets excluding inventory and prepayments. This ratio also change magnitude 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 ratify 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 viewing a sharp improvement in profitability.

Without some(prenominal) produce about earthy profit margin or opposite profitability ratios, it is ambitious to assess the reason for the change, perhaps at that place was an increase in revenues or a decrease in expenses. (3marks) iii)Two ratios utilize to measure the efficiency of the follow are inventory overthrow and debtors turnover. It took 40 days longer for the company in 2010 to contend its inventory compared to 2009 showing deterioration in e! fficiency. In accompaniment an increase in debtors turnover shows that it took on honest 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 allurement policy, creed terms offered to customers and its...If you want to get a to the full essay, entrap it on our website: BestEssayCheap.com

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