Accounting for Business Question Answer 2022

Running head: ACCOUNTING FOR BUSINESS
Accounting for Business
Name of the Student
Name of the University
Authors Note
Course ID

ACCOUNTING FOR BUSINESS1
Table of Contents
Part A: Financial Ratios and Financial Statement Analysis.........................................2
Answer to A:..............................................................................................................2
Answer B:..................................................................................................................2
Part B: Income and Revenue.......................................................................................3
Part C: Comparing Balance Sheet...............................................................................4
Answer A:..................................................................................................................4
Answer B:..................................................................................................................4
Answer C:..................................................................................................................4
References:..................................................................................................................5

ACCOUNTING FOR BUSINESS2
Part A: Financial Ratios and Financial Statement Analysis
Answer to A:
Current Ratio: The current ratio is referred as the liquidity ratio which is useful in
examining the ability of the company to meet the obligations relating to short-term
liabilities with the current assets (Schaltegger, Etxeberria and Ortas 2017). The ratio
is useful because it helps the investors and creditors to understand the liquidity
position of company to pay its current liabilities.
Quick Ratio: The quick ratio is useful ratio in evaluating the company’s ability of
paying its current liabilities when it becomes due and can only be met by quick
assets. If the company has quick assets to cover the total current liabilities, the
company will be able to pay its debt without the requirement of selling long term
capital assets.
Accounts Receivable turnover: This ratio is known as efficiency ratio which is
useful in measuring the number of times the business can convert its accounts
receivables in cash throughout the year (Caskey and Laux 2016). As the ratio is
useful in measuring the capability of business to effectively collects its receivables, it
makes sense that higher ratio is considered favourable.
Inventory turnover: The ratio measures the number of times the company sells its
total inventory throughout the year. The ratio represents how effectively the company
is able to control its merchandise and as a result it is effective during the long run.
Below stated is the detailed computation of ratio for Big Bang Private Ltd for the
financial year 2018 and 2018 are as follows;
Answer B:
Short-term solvency analysis:
With respect to the above stated table, despite the fall in the current ratio in
2018 from 2.74 to 2.08 in 2009, the ratio appears to be higher than the standard