Violet Chans Consultancy Pty Ltd

Added on -2020-02-18

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Task – 6Violet Chan's Consultancy Pty LtdRatio Calculation(a)Current Ratio=Current Assets / Current Liabilities=42854/4200= 10.20 (b) Assets Turnover Ratio=Sales / Average total Assets=37812/ ((56654+47850)/2)=72.36%(c)Return on assets=Net Income / Average Total assets=5454/ ((56654+47850)/2)=10.44%(d)Debt to Equity Ratio=Debt / Equity=4200/52454=0.0801(e)Debt Ratio=Total Liabilities / Total assets=4200/56654=0.0741(f) Equity Ratio=Total Equity / Total assets=52454/56654=0.9259Analysis of RatioRatios help company in decision making. Therefore, it is very important for acompany to calculate and analyse these ratio. Some of the important ratios aregiven below:1.Current Ratio – It shows the liquidity position for the firm. Liquidity is ameasure of degree to the extent company can meet its short term andimmediate liabilities. Established standard in the market is 2. In the givencase, current ratio is 10.20 which shows company has sufficient liquid assetsto pay off its short term and immediate liability. However, figure of 10.20 alsoindicates that company has liquid assets more than its requirement.Therefore, company must consider investing some of its current assets orconsider paying dividend to shareholders.2.Assets Turnover ratio – Asset Turnover ratio indicates the efficiency withwhich company has used its assets to generate sales. Higher the ratio, better

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