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AG911 - Accounting Financial Analysis Report

   

Added on  2020-03-04

8 Pages1890 Words34 Views
Running head: ACCOUNTING FINANCIAL ANALYSIS REPORTAccounting financial analysis reportName of the studentName of the universityAuthor note

1ACCOUNTING FINANCIAL ANALYSIS REPORTTable of ContentsQUESTION 1.............................................................................................................................2(i)Liquidity ratio calculation...............................................................................................2(i)Analysis of liquidity position..........................................................................................2(ii)Financial advice to improve the overall liquidity position..........................................3QUESTION 2.............................................................................................................................3(i)Capital structure ratio......................................................................................................3(i)Analysis of capital structure ratio...................................................................................3QUESTION 3.............................................................................................................................4(i)Calculation of profitability ratio......................................................................................4(i)Analysis of profitability position of the company...........................................................4QUESTION 4.............................................................................................................................5(i)Calculation of asset management ratio...........................................................................5(i)Analysis of asset management efficiency position.........................................................5QUESTION 5.............................................................................................................................6Investment decision................................................................................................................6Reference....................................................................................................................................6

2ACCOUNTING FINANCIAL ANALYSIS REPORTQUESTION 1(i)Liquidity ratio calculationLiquidity ratiosFormula20152016Current ratiocurrent assets / current liabilities1.631.53Acid test ratio(current assets - inventories)/ currentliabilities1.300.93(i)Analysis of liquidity positionCurrent ratio – The current ratio of Blackmores Limited is 1.53 for 2015 and 1.63 for 2016which is more than the required rate of 1. It can be recognized from the above calculation thatthe liquidity position of the company for the year has been improved. The current ratio of anycompany is regarded as healthy if it is 1 or more than one. However, the ratio more than 2indicates that the company is not utilising its working capital in efficient way (Morris andShin 2016). Therefore, it can be said that the liquidity position of the company is good andthey are in comfortable position to pay-off their current obligation comfortably.Acid test ratio – It is calculated that the acid test ratio for Blackmores limited for the Year2015 is 0.93 and that of 2016 is 1.30. The acid test ratio identifies whether the organization iscapable of paying off its short-term obligations with the available short-term assets.Generally the acid test ratio of between the range of 0,20 to 0.50 is considered healthy (Noorand Lodhi 2015). It can be identified that the liquidity position of the company while theinventories are not considered is quite healthy. Though, the ratio of 2016 is quite better ascompared to that of 2015, the acid test ratio of both the year is healthy. (ii)Financial advice to improve the overall liquidity positionReducing the overhead – reducing the overhead of the company is one of the ways toimprove the liquidity position (Zhu 2014). Operating expenses or overhead cost include

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