Financial Statements Elements and Financial Statement Analysis

Running head: FINANCIAL STATEMENTS ELEMENTS AND FINANCIAL STATEMENT
ANALYSIS
Financial Statements Elements and Financial Statement Analysis
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1FINANCIAL STATEMENTS ELEMENTS AND FINANCIAL STATEMENT ANALYSIS
Table of Contents
Part A: Financial Ratios and Financial Statement Analysis..............................................2
Requirement a:...............................................................................................................2
Requirement b:...............................................................................................................3
Part B: Income and Revenue............................................................................................3
Part C: Comparing Balance Sheet....................................................................................4
Requirement a:...............................................................................................................4
Requirement b:...............................................................................................................4
Requirement c:...............................................................................................................4
References:........................................................................................................................5

2FINANCIAL STATEMENTS ELEMENTS AND FINANCIAL STATEMENT ANALYSIS
Part A: Financial Ratios and Financial Statement Analysis
Requirement a:
Current ratio: It is a liquidity ratio that aids in gauging the ability of an organisation to
settle its short-term dues falling within a year. It provides an idea to the analysts and
investors the way an organisation could increase its current assets on the statement of
financial position for fulfilling its short-term debt as well as other payables (Berk and
DeMarzo 2016).
Quick ratio: Quick ratio is a liquidity ratio, which refines the current ratio through
measurement of the level of most liquid assets present to cover short-term dues. It is
more conservative compared to current ratio due to the exclusion of inventory as well as
other current assets that are more difficult to be converted into cash (Brigham et al.
2016).
Accounts receivable turnover: This ratio is used to compute the effectiveness of an
organisation in terms of collecting debts and extending credits. It could be computed by
dividing net credit sales by average accounts receivable and it is typically computed
annually (DeFusco et al. 2015).
Inventory turnover: Inventory turnover ratio could be defined as an efficiency ratio,
which gauges the way through which inventory is managed effectively. It could be used
for ascertaining whether the inventory level is in excess compared to sales.
The detailed calculations of these ratios for Big Bang Private Limited for the
years 2018 and 2019 are represented in the form of a table as follows: