RECORDING BUSINESS TRANSACTIONS.

Running head: RECORDING BUSINESS TRANSACTIONS
1
RECORDING BUSINESS TRANSACTIONS

Running Head: RECORDING BUSINESS TRANSACTIONS
Ratio analysis is a technique that is used as a financial measurement tool to understand the
position of the company against the performance of the competitors. As per the current scenario
the net profitability of James is 14.58% and the same in case of competitors’ is 28% which
clearly implies that James needs to improve the profits by reducing the operating costs
(Robinson, Henry, Pirie and Broihahn, 2015).
Particulars James
Competitor's
Average
Net Profit margin
Net profit 14.58% 28%
Net sales
Gross Profit Margin
Gross profit 73% 65%
Net sales
Current Ratio
Current Assets 11.08 2.1
Current Liabilities
Acid test ratio
Quick Assets 10.88 1.5
Current Liabilities
Accounts receivable collection
period
Accounts receivable * 365 60.83 47
Net Sales
Accounts Payable payment
period
Accounts payable * 365 336.92 65
Cost of goods sold
The gross margin of the company is greater than the competitor’s average at 73% and the same
is 65%, and this also implies that company is ahead and performing better. The current ratio is

Running Head: RECORDING BUSINESS TRANSACTIONS
higher than 2:1 at 11.08 times and this indicates that cash in hand is higher and the liabilities are
yet to be paid off. The quick ratio is similarly counted at 10.88 times and it is higher than the
average ratio.
The collection ratios suggest that cash from accounts receivables is collected at 60.83 times and
the same is 47 days in case of the competitors and this indicates that company needs to shorten
the credit terms to avail the cash speedily. The payment to the creditors is also necessary and
hence, the collection period is higher than ever at 336.92 days and this implies the company
needs to pay back the cash to the creditors on time as this would decline the performance of the
management (Williams and Dobelman, 2017).