Financial Decision Making: Calculation of Ratios and Performance Analysis

FINANCIAL DECISION
MAKING

TABLE OF CONTENTS
TABLE OF CONTENTS..............................................................................................................2
INTRODUCTION...........................................................................................................................3
Calculation of ratios....................................................................................................................3
Performance of the ratios............................................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Financial decision making is referred to as the decision taken by the analysis and
evaluation of the financial information of the company (Hirshleifer, Jian and Zhang, 2018).
These decision impact the working of the company to a great extent as this will help the
company in increasing the profitability of the company. The current report is based on the
company Alpha Ltd and it will analyse the financial position. The current report will calculate
some of the ratios and then it will outline the performance of the company in accordance of the
calculated ratios.
Calculation of ratios
Calculation of Ratios 31-DEC-2017 31-DEC-2018
Return on capital employed = Operation Profit ×100
Capital Employed
20% 14%
Net Profit Margin = Net Profit×100
Sales Revenue
12.50% 8.75 %
Current ratio = Current Assets
Current Liabilities
2.35 0.93
Debtors collection period = Trade Receivable ×365
Credit Sales
68.44 73.00
Creditors collection period = Trade Payables ×365
Credit Purchases
73 159
Working note
2017 2018
Liquidity ratio