Business Performance: Ratios and Analysis

Business performance

Table of Contents
Introduction......................................................................................................................................3
Liquidity ratio..............................................................................................................................3
Profitability ratio..........................................................................................................................4
Capital gearing ratio.....................................................................................................................5
Investment potential ratio.............................................................................................................6
Conclusion.......................................................................................................................................6
References........................................................................................................................................7

Introduction
Business performance includes financial and non financial aspect of the company to measure the
growth and market share of the company (Husain and et.al 2020). It also defines the key areas of
the company along with various outcomes. This report is based on various ratios such as liquidity
ratio, profitability ratio, capital gearing ratio and investment potential ratio.
Liquidity ratio
Liquidity ratio is known as a type of financial ratio which helps to determine the company’s
ability and potential to repay its short term debt obligation. 3 liquidity ratios are frequently used –
current ratio, cash ratio, and quick ratio.
Current ratio
To calculate the current ratio of all the current assets divided by the current liabilities (Abdul,
2017). This ratio shows that company can repay its current liabilities with the help of current
assets.
Quick ratio
It is also similar to current ratio but it focuses more on liquidity. It includes cash marketable
securities and account receivables.
Formula
Cash + account receivables + marketable securities/ current Liabilities
Cash ratio
This ratio focuses on company’s most liquid asset. It consists only those assets which are always
available with the company to repay its search term debt obligations
Formula
Cash + marketable securities / current Liabilities
Particular 2019 2020 Change
Current assets 468 657 40.3% (increase)
Current liabilities 234 346 47.82% (increase)
Inventory 87 105 20.34% (increase)
Cash 156 272 73.88 % (increase)