Accounting for managers Question 1 3 a) Current ratio current asset/current liabilities 1.06 1.01 Stability ratios Formula 2018 2019

Accounting for managers

Table of Contents
Question 1..................................................................................................................................3
a).............................................................................................................................................3
b)............................................................................................................................................3
c).............................................................................................................................................3
Question 2..................................................................................................................................3
Question 3..................................................................................................................................4
a).............................................................................................................................................4
b)............................................................................................................................................5
c).............................................................................................................................................5
d)............................................................................................................................................5
e).............................................................................................................................................5
References..................................................................................................................................7

Question 1
a)
Liquidity ratios
Particulars Formula 2018 2019
Current ratio current asset/current liabilities 1.06 1.01
Quick ratios quick asset/current liabilities 0.88 0.78
Stability ratios
Particulars Formula 2018 2019
Debt ratio Total liabilities/total
assets
0.78 0.80
leverage ratio total assets/total equity 4.59 4.91
b)
The liquidity is required to be maintained in the company so that all of the obligations can be
met appropriately. The current ratio for the industry is 1.7 and in the given case this is not
maintained by the company and it is declining from 1.06 in 2018 to 1.01 in 2019. The quick
ratio for the industry is at 1 and the same is also not maintained (Delen, Kuzey and Uyar,
2013). It is lower than this level and so it can be said that liquidity is not maintained by the
company.
For the stability purpose, there are various ratios that are calculated and in respect of the debt
ratio the industry manages 60% and the same is higher for the company which shows the
company is not maintaining its debt position and this will be affecting its stability (Babalola
and Abiola, 2013). The leverage ratio is at 2.5 and the ratio of the company for the same is
much higher at 4.91. This is increasing and the company is required to increase its equity
investment.
c)
As an unsecured investor, the investment shall not be maintained in the company as there is
not much of the liquidity maintained and it will be facing difficulty in making the payments
related to bonds. The debt ratio is high and by that company is currently having a high
amount of obligation to be met.