Accounting Assignment | Ratio Calculation

Added on - May 2020

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Running head: QUESTION 10 1Question 10NameInstitution
QUESTION 102Question 10:In this question, the Appendix 16’s projected data as highlighted in both balance sheets andincome statements for a five-year forecast horizon remains useful in the calculation of certain key ratiosto allow effectively comment on the findings. This analysis and subsequent comments are offered in thefollowing subsections below:Liquidity Ratio:Operating Cash Flow Ration=Operating Cash Flow/Total Debt102665/135000=0.76Quick Ratio= (Current Asset-Inventories)/Current Liabilities(726715-345678)/354650=1.1Current Ratio=Current Asset/Current Liabilities726715/354650.0=2.10From the above computation, it is apparent that there is a declining pattern in the above key ratiosbetween the years 2008 and 2010. The declining trend can be due to several factors that the companyneeds to investigate in details to help determine what best can be done to solve the problem. This isbecause by having a declining trend in the current ratio, the business is put in awkward situation becauseit cannot meet its current liability (Lynn & Wertheim, 1993). This makes the business not able to accesscurrent liability which really impedes the growth of the business.Profitability Ratio:Gross Profit Ratio= (Gross Profit/Sales) X100(943259/1793268)X100=52.60%
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