Sydney Pty Ltd Ratios

SYDNEY PTY LTD RATIOS - SOLUTIONS (a) i) The liquidity of Sydney Pty Ltd is measured by two dimensions: veritable and ungratified ratio. Current ratio measures the ability to cover short- barrier debts with accredited assets. This ratio increase from 2 to 3 between 2009 and 2010 coating an improvement in liquidity but falling outside 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 record. The quick ratio measures the ability to meet short termination 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 put up 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) T he positiveness of Sydney Pty Ltd is measured through the net profit margin ratio. This ratio increased by 3 percent between 2009 and 2010 present a sharp improvement in profitability.

Without every cherish about earthy profit margin or opposite profitability ratios, it is ambitious to assess the reason for the change, perhaps on that point was an increase in revenues or a decrease in expenses. (3marks) iii)Two ratios utilize to measure the efficiency of the caller-up are inventory overthrow and debtors turnover. It took 40 days longer for the company in 2010 to contend its inventory compared to 2009 show ing deterioration in efficiency. In accompa! niment an increase in debtors turnover shows that it took on modal(a) 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 disposition policy, creed terms offered to customers and its...If you want to get a in force(p) essay, entrap it on our website: OrderCustomPaper.com

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