Ratio Analysis and Credit Extension

ACCOUNTING AND FINANCE
FOR DECISION-MAKING

TABLE OF CONTENTS
MAIN BODY...................................................................................................................................1
Ratio Analysis..............................................................................................................................1
Most crucial ratios in the industry averages that shall be determining the extending of the line
of credit........................................................................................................................................2
Recommendation of whether the bank should extend the credit or not.......................................2
REFERENCES................................................................................................................................4

MAIN BODY
Ratio Analysis
The ratio analysis of the Bujang Lapok Berhad manufacturers for the current year as per the
financial statements that were provided.
S.NO RATIOS FORMULA CALCULATION
1 Current Ratio Current asset / Current liabilities 1.485
Current assets 29184
Current liabilities 19657
2 Acid Test Ratio
(Current asset – Inventory) / Current
liabilities 1.258
Current assets 29184
Inventory 4448
Current liabilities 19657
3 Inventory Turnover Ratio
Cost of goods sold / Average
inventory 10.585
Cost of goods sold 41304
Average inventory 3902
4 Average collection period Accounts receivable / Net sales * 365 13.744
Accounts receivable 2003
Net sales 53195
5
Non Current Asset
Turnover Revenue / Non current assets 2.840
Revenue 53195
Non Current Asset 18733
6 Total Asset Turnover Revenue / Average total assets 1.152
Revenue 53195
Average total assets 46187.5
7 Debt Ratio Total debts / Total assets 20.57%
Total debts 9858
Total assets 47917
8 Times Interest Earned
Earnings before interest and tax /
Interest expenses 4.466
Earnings before interest and
tax 4444
Interest expenses 995
1