#172 Use the financial statements below for the

Use the financial statements below for the following requirements - Accounting

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TASK 1 - Ratio Analysis 1
Use the financial statements below for the following requirements
a. Conduct horizontal analysis (calculation only)
b. Conduct vertical analysis (calculation only)
c. Conduct ratio analysis (calculation only) (DuPont analysis)
d. Comment on the management's ability to manage the accounts receivable over the past two years.
e. What is a possible explanation for the decrease in Wages and Salaries expense?
f. Explain the reasons for the increase in the bank loan.
g. Comment on the current ratio.
ħ Comment on the company's financial performance over the past two years based on the detailed analyses above.
i. What is the limitation of the above comments?

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Ratio Analysis
	Formula	2016	2015	Increase/Decrease	Analysis
1. Current ratio	Current Asset/Current Liability	19.41	14.62	4.79
2. Quick Ratio	(Cash+Temp invt+Account receivable)/Current Liability	6.11	4.07	2.04	Also called the acid test, this ratio subtracts inventories from current assets, before dividing that figure into liabilities. The idea is to show how well current liabilities are covered by cash and by items with a ready cash value. Inventory, on the other hand, takes time to sell and convert into Liquid test.
3. Working capital	Current Asset-Current Liabilities	32,400.00	27,370.00	5,030.00
4. Debt Equity ratio	Total Debt/Tota Equity	0.44	0.43	0.01	What if your prospective investment target is borrowing too much? This can reduce the safety margins behind what it owes, jack up its fixed charges, reduce earnings available for dividends for folks like you and even cause a financial crisis.
5. Asset Turn Over ratio	Total asset/ turnover	1.67	1.67	0.00
6. Inventory turnover ratio	Inventory/Turnover	0.15	0.16	-0.01
7. Debtor turnover ratio	Debtor/Turnover	0.02	0.03	-0.00

d	Comment on the ability of the maintenance of the ability of the account rece.
	Account receivavle amount is decrease as comapre to the last year i.e 2015 but the turnover of the company is increase as campare to the last year, Debtor turnover ration is also Decrease as comapre to the last year it means company is ablr to recor the amount drom the customer and Also the focus of the company to make cash sale rather than credit.
e.	Company wages and salary is decrease as comapre to the last year there should be the possible reasons
	1. Company is transferring there work from human to computer era.
	2. Increased labour market flexibility, such as more zero hour contracts,
	3. Recession – causing unemployment and downward pressure on wages
f	Reasons for increasing the bank loan
	1. Company may be starting a new project for which company need investment.
	2. need equipment for your business. …
	3. want to purchase more inventory. …
g	Comment on current ratio
	The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year. It tells investors and analysts how a company can maximize the current assets on its balance sheet to satisfy its current debt and other payables.
	Current ratio is incresing
h	As we analysis all the financial statement of the company incluind the ratio analysis. All the parameters shows that company is in growing position
	Company have made some extra expenses on the operation (See COGS) because COGS is increasing more as compared to the turnover of the company, its show that company will loose his gross profit because of this
	4. Business opportunities so to expand the business