Computerized Problem Solution.

Added on - 22 Sep 2019

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[TYPE THE COMPANY NAME]Computerized ProblemSolutionRatio Analysis
Computerized Problem SolutionTables of ContentRatio AnalysisComparison with industry averagesImpact on Financial Position of the companyCalculation of ratiosImpact on ratio of companyConclusion2
Computerized Problem SolutionA)If the new system is installed , the following data are projected, which have the followingmentioned impact on the RatiosQuick ratioQuick Ratio of Cary increases from 0.8 to 1.2, which shows that company as of now have moreability to meet his current financial obligations with the available quick hands on fund.Accounts Receivable have decreased from 439000 to 395000, which made available theresources to pay off the accruals that leads to change in quick ratio from 0.8 to 1.2Quick Ratio of the industry average is 1, i.e ideal ratio, which shows company have sufficientleverage against liquidity risk.Quick Ratio of Cary before new system installed was 0.8 which shows that company has takenmuch risk by not maintaining an appropriate buffer of liquid resources.With the change in system Quick Ratio increases and the higher quick ratio indicates that thecompany have too much spare cash, it may consider investing the surplus in new ventures andin case company is out of investment it may provide more return to shareholders.3
Computerized Problem SolutionCurrent RatioCurrent Ratio with the change in system increases to 3 which is more than the industry averagei.e 2.7 which shows company have more ability to pay off its debt and obligations compare tocompetitive industries in the market as it have large proportion to asset to its liabilities.Inventory turnover RatioInventory Turnover ratio measures how fast a company is selling inventory. A low inventoryratio implies a weak sales and therefore excess inventory. A high ratio implies strong sales or/and large discounts.With the change in system , inventory ration increases from 4 to 4.9 , which shows that there isincrease in sales , inventory in hand has been reduced . But as compared to industry averageinventory ratio is still not to mark which show a ideal turnover. As per the industry average,inventory turnover ratio is 5.8. As against to it, even after adoption of new system , turnover ratioof 4.9 is met, which shows much more sales or marketing effort is to be taken, which leads toless inventory in hand.DAYS SALES OUTSTANDINGDSO is a average number of days a company take to collect revenue after sales is made.CARY average number of days collection after sales made is reduced to 33 from 37 which showa positive impact that average sales collection is made in 33 days which is too nearby to industryaverage i.e 32. With comparison to industry average it can be depicted that still company need tocollect payment quickly otherwise it will face problem to meet up costs.4
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