BUS285: Greta's Furniture - Ratio Analysis and Performance Review

This report provides a comprehensive ratio analysis of Greta's Furniture Private Limited, comparing its performance to competitors Furniture Mart and Furniture Bazaar. The analysis, conducted for the BUS285 course, focuses on key financial metrics including liquidity (current ratio, inventory turnover), profitability (net profit margin, ROE, gross margin), and solvency (debt ratio). The report highlights Greta's strengths and weaknesses, such as a strong solvency position but lower profitability compared to Furniture Mart. The report also provides strategic recommendations for improvement, including optimizing inventory turnover, scrutinizing costs to improve profitability, and focusing on long-term borrowings. The conclusion emphasizes the importance of proactive strategies for Greta's Furniture to improve its financial standing and competitiveness in the retail furniture market. The report is well-structured, referencing relevant financial literature to support its analysis and recommendations.

Running Head: TECHNOLOGY AND ACCOUNTNG PROCESS
1
TECHNOLOGY AND ACCOUNTNG PROCESS

TECHNOLOGY AND ACCOUNTNG PROCESS
Table of Contents
Part H: Ratio Analysis.................................................................................................................................4
Liquidity..................................................................................................................................................4
Profitability..............................................................................................................................................4
Solvency..................................................................................................................................................5
Recommendation.........................................................................................................................................5
Conclusion...................................................................................................................................................5
References...................................................................................................................................................6

TECHNOLOGY AND ACCOUNTNG PROCESS
Part H: Ratio Analysis
Ratio analysis is the methodology that can be one of the powerful tools used for
analyzing the performance of the company in all areas. As per the current scenario, Greta’s
Furniture Private Limited has been analyzed to interpret the results in the areas like liquidity,
profitability, solvency and the overall essence. Apart from this, the two competitors have also
been analyzed such as Furniture Mart and Furniture Bazaar (Wen & Zhu, 2019).
Liquidity
Under the liquidity ratios which are a metric used to measure the capacity of the company
to pay back the current liabilities as soon as possible by recovering the cash from inventory or
receivables. In this section current ratio and inventory turnover ratio in terms of days has been
analyzed. The current ratio of Greta is 2.52 times whereas the same is 3.79 times in case of
Furniture Bazaar and 3.74 times for Furniture Mart and. This displays that Furniture Bazar is
able to settle the current liabilities faster than the other two companies. Inventory turnover ratio
on the hand defines the same situation, where Greta is taking the highest amount of days in
converting the cash such as 284.24 days or 9 months and Furniture Bazar the lowest at 85.54
days, followed by Furniture mart at 102.68 days. It is clearly evident that Furniture Bazar is
taking lead in this area (Monea, 2017).
Profitability
The profitability ratio shows how much productive the business is and how well the
organization can keep aside the benefits to circulate among the investors or use it for the
potential speculations. The net profit margin has been lowest in case of Greta at 20.24% and
highest for Furniture Mart 49.61%. The roe margins are nearly satisfactory and gross margins are

TECHNOLOGY AND ACCOUNTNG PROCESS
fair for all the three companies. This also implies the profitability of Greta can be improved to
match the level of Furniture mart.
Solvency
The financial metric that is used to assess the balance of the debt and how much assets
have been funded through it is determined under this section. In the event of Greta, the
organization's obligation proportion is 0.41 and the equivalent is 0.44 for Furniture Mart and
Furniture Bazaar respectively (Gabric, 2018).
Recommendation
To improve the liquidity position the organization will dispose of the out of date
innovation, and the significant focal point of the organization will be on long haul borrowings
instead of the momentary borrowings. In order to set the right profits for the business the
company shall scrutinize the costs and the solvency position is sound and the organization will
keep up such situation so as to monitor the assets and its use in the correct zones (Campbell,
D'Adduzio, Downes & Utke, 2019).
Conclusion
From the overall analysis it can be concluded that the, ratios analysis serves to be one of
the best techniques and this analysis figured out that the company is required to be proactive and
work upon the improvement strategies as mentioned above on an immediate basis to get ahead of
the other two companies.

TECHNOLOGY AND ACCOUNTNG PROCESS
References
Campbell, J. L., D'Adduzio, J., Downes, J., & Utke, S. (2019). Do Investors Adjust Financial
Statement Ratios when Financial Statements Fail to Reflect Economic Substance?
Evidence from Cash Flow Hedges. Evidence from Cash Flow Hedges (April 2019).
Gabric, D. (2018). Determination of Accounting Manipulations in the Financial Statements
Using Accrual Based Investment Ratios. Economic Review: Journal of Economics and
Business, 16(1), 71-81.
Monea, M. (2017). Indicators concerning financial performances. Calitatea, 18(S1), 314.
Wen, H., & Zhu, T. (2019). Interpretation of Financial Statements. John Wiley & Sons.