Financial Statement Elements and Financial Statement Analysis

Running head: FINANCIAL STATEMENT ELEMENTS AND FINANCIAL STATEMENT
ANALYSIS
Financial statement elements and financial statement analysis
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FINANCIAL STATEMENT ELEMENTS AND FINANCIAL STATEMENT ANALYSIS
Table of Contents
Part A:........................................................................................................................................2
Requirement a)...........................................................................................................................2
Requirement b)...........................................................................................................................2
Part B:.........................................................................................................................................3
Part C:.........................................................................................................................................4
Requirement a)...........................................................................................................................4
Requirement b)...........................................................................................................................4
Requirement c)...........................................................................................................................5
References list:...........................................................................................................................6

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FINANCIAL STATEMENT ELEMENTS AND FINANCIAL STATEMENT ANALYSIS
Part A:
Requirement a)
The following table depicts the computation of ratios.
Jun-19 Jun-18
Current ratio 2.08 2.74
Quick ratio 0.84 0.89
Accounts receivable
turnover in days
39.98 48.42
Inventory turnover
in days
176.21 340.67
Accounts receivable
turnover in times
9.13 7.54
Inventory turnover in times 2.07 1.79
Current ratio is computed by dividing current assets by current ratio which has
decreased in current year compared to previous year. Quick ratio is obtained by dividing
current assets minus inventory by current liabilities. Accounts receivable turnover in days is
obtained by dividing 365 days by accounts receivable turnover ratio and inventory turnover
has been obtained by dividing 365 days by inventory turnover ratio (Robinson et al. 2015).
Requirement b)
The short term solvency position of Big Bang Pty Limited is evaluated by the
computation of current ratio and quick ratio. Current ratio has reduced from 2.74 in year 2018
to 2.08 in year 2019 indicating that the ability of current liabilities to finance the short term
payments have decreased. Quick ratio has decreased from 0.89 in year 2018 to 0.84 in year
2019 indicating that efficiency of quick assets to finance the obligations has reduced.