Analysis of the Elements of Financial Statements

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[COMPANY NAME]
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ACCOUNTING
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Ratio analysis
This tool is used to analyse the elements of financial statements, which analyses whether the
company has been performing well or not. The analysis uses several types of ratios and
criteria on the basis of which the performance of the company in every aspect is evaluated
(Boldeanu, & Tache, 2016).
Liquid ratio
This ratio is used to examine the liquidity of the company by predicting whether the company
is able to meet the short-term obligations or not. Among the liquidity ratios, two prominent
ratio used are current ratio and quick ratio (Boshara, & Emmons, 2015).
Current ratio- The ideal ratio for current ratio is 2:1, where it indicates that the company must
have two times of current assets to pay off the current liabilities. The ratio represents the
company`s obligations through its liquid assets.
Liquidity ratios
Current ratio (Current asset/current
liability) 2.51
Quick ratio (Quick assets/current liability) 2.41
The current ratio of brown electronics company indicate that the company has maintained a
ratio of 2.51 times. The company maintains 2.5 times of current assets to pay off the current
liability. The company is quite efficient in accomplishing the current liquidity of the
company. Quick ratio reflects the absolute liquidity of the company by reflecting the quick
assets in the quick ratio (Boshara, & Emmons, 2015).
Net profit ratio