Accounting for Business

ACCOUNTING FOR BUSINESS
STUDENT ID:
[Pick the date]

PART A
a) 1) Current Ratio – The short term liquidity is captured using this ratio which presents an
overview with regards to availability of current assets for meeting the current liabilities of
the reporting entity.
2) Quick Ratio: The short term liquidity is captured using this ratio which presents an
overview with regards to availability of liquid current assets (excluding inventory) for
meeting the current liabilities of the reporting entity.
3) Accounts Receivable Turnover – The operational performance is captured using this
ratio which focuses on the time required for the firm to convert the credit sales into cash
collection from such customers.
2

4) Inventory Turnover – The operational performance is captured using this ratio which
focuses on the time required for the firm to convert the outstanding inventory into sales.
b) The short term liquidity performance of the company has taken a hit in 2019 as compared
to the previous year i.e. 2018 which is apparent from the lowering current ratio despite
some improvement in liquid ratio. A deteriorated liquidity position is reflected from the
lowering of current ratio and liquid ratio. Even though there has been a sizable dip in the
current ratio which is witnessed in 2019, the current liquidity position of the company
does not raise any concern as the current ratio continues to be above 2 while the quick
ratio is almost 1 (Lasher, 2017).
Taking the turnover ratios into consideration and comparing the 2018 and 2019 performance,
it is evident that an overall improvement in operational performance is evident for the year
2019 as compared to the previous year. However, despite this improvement, it is noteworthy
3