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Accounting Statement Analysis (PDF)

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Added on  2021-06-16

Accounting Statement Analysis (PDF)

   Added on 2021-06-16

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RUNNING HEAD: ACCOUNTING STATEMENT ANALYSISAccounting statement analysis
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Accounting statement analysis 2Question 3For making an investment of worth $50,000, the decision has to be made regarding investing the amount in a term deposit or purchasing the shares of Briscoe Group Limited. In order to decide between the two, following analysis of the company is been done for the past five years. It includes:Ratio analysis Performance of share priceRecent announcementsRatio Analysis of the company The key ratios calculated are as follows:1.Current ratio It is one kind of liquidity ratio that reflects the financial health of a company by measuring itsability to pay its current liabilities with its current assets. The ideal CR is 2:1 (Periasamy, 2009).With reference to the calculation done in Appendix, it can be said that the current ratio of Briscoe Group has fluctuated over the past five years. In 2015, the ratio was 2.18 which reduces to a great extent in 2016 and reported at 1.54. The same further falls to 1.53 in 2017 and currently it is 1.74. This indicates that Briscoe has improved its performance in this year as of now and its liabilities has reduced in 2018. As a result of which, its CR increases, making the company capable of paying its short term debt or obligations. 2.Quick ratio
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Accounting statement analysis 3It is another liquidity ratio which reflects the same as current ratio does. Inventories and prepaid expenses are not included in the calculation of quick assets. The idea ratio is 1:1 (Parrino, Kidwell & Bates, 2011).The ratio calculated in case of Briscoe Group reflects the same trend as the current ratio of the company. In 2015, it was 1.24 which falls to 0.40 in 2016. It then again rises to 0.68 in 2017 and further increases to 0.91 in 2018. Still less than that of in 2015. This rise was due tothe increase amount of cash balance reported at the end of January 2018. The boost in the quick ratio indicates that Briscoe has managed its quick assets properly for meeting its short term liabilities (Appendix).3.Gross profit ratio Gross profit is the amount earned by the company out of its total revenue after paying its cost of goods sold. The figure is expressed as a percentage of total sales and it reflects the profitability position of a company (Jenter & Lewellen, 2015).Referring to Appendix, the GPR of Briscoe remains almost same during the past four years. There is no huge change reported in the past five years. In 2015 the ratio was 39% which nowincreases to 40%. However, it was 41% in 2017. This was due to the less fluctuation in the COGS of Briscoe Group which keeps it GPR almost same. It shows that the company is able to maintain its profitability over the past five years. 4.Net Profit ratio It is also one of the key financial metric used for measuring the profitability of the company. The amount of net profit expressed as percentage of sales. Higher the net profit, higher will be the profitability (Alexander, Britton & Jorissen, 2007).
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