FINANCE FOR BUSINESS.

FINANCE FOR
BUSINESS
STUDENT ID:
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Executive Summary
The liquidity position of the company over the last three years has worsened as all
the liquidity ratios have shown a declining trend. The current ratio of the company is
lower than 1 which is a matter of concern and needs to be carefully monitored. With
regards to capital structure ratio, the interest coverage ratio does not provide much
comfort to the lenders. Also, the other ratios indicate increasing share of debt and
reduction of equity in capital structure.
TREND ANALYSIS
A trend analysis has been performed using the ratios pertaining to liquidity and
capital structure of Primary Health Care company as exhibited below.
Liquidity Ratios
The relevant liquidity ratios for the company are as summarised below (Helius,
2016;2018).
The liquidity ratios play a vital role in highlighting the ability of the company to meet
the short term obligations typically contained as current liabilities. Any issue in this
regards could lead to a short term liquidity crunch for the company which may not
only planned expansion but also routine business activities (Damodaran, 2014).
The current ratio of the company highlights a deteriorating trend whereby there is a
constant decrease on a y-o-y basis and this trend is maintained for the whole period.
The fact that current ratio is less than 1 for each of the three years further raises
questions on the ability of the company to continuously service the outstanding
current liabilities (Lasher, 2016). The deteriorating current ratio may be attributed to
the continuous increase in current liabilities on account of increasing provisions. For
2018, there was a significant jump in current liabilities on account of the funding of
project Leapfrog. Considering that the company does not have any inventory, hence
the quick ratio is the same as current ratio. Further, cash ratio does not show any
change from 2016 to 2017 but has deteriorated in 2018. Clearly, the liquidity ratios