Following report is compiled to analyze the after math of the expansion carried out by our Corporation. The researcher has assessed the financial statements over five categories of ratios over five performance aspects of the corporation. Liquidity Liquidity measures short-term ability of the organization to pay its debts and expenses. Liquidity is the key indicator of short term financial strength. The Current Ratio “The current ratio is a liquidity and efficiency ratio that measures a firm's ability to pay off its short-term liabilities with its current assets”(myaccountingcourse). After the expansion corporations current ratio has decreased from 2.33 times of current assets to 1.17 current assets. Where the industry average is 2.7(Table1). …show more content…
Collection period has increased to 38.24 days in 2015 from 37.35 days in 2014(Table 1). Accounts receivable turnover “Accounts receivable turnover is the number of times per year that a business collects its average accounts receivable. The ratio is intended to evaluate the ability of a company to efficiently issue credit to its customers and collect funds from them in a timely manner”(accountingtools). There is a slight change in receivable turn over where it was 9.77 times in 2014, in 2015 it is decreased to 9.55 (Table1). Inventory turnover “Inventory turnover is a measure of the number of times inventory is sold or used in a time period such as a year”(wikipedia.org). Before the expansion in 2014 the business turned its average stock 4 times in to sales but in 2015 it increased to 4.29 times (table1). Operating …show more content…
In 2014 the corporation has been able to earn $0.06 for every $1 of asset invested which is 6% return on assets, but due to the heavy loss made in 2015 following the expansion return on asset has become negative 6% (Table 2) Operating profit margin Operating profit margin “measures what percentage of total revenues is made up by operating income. In other words, the operating margin ratio demonstrates how much revenues are left over after all the variable or operating costs have been paid”( myaccountingcourse). In 2014 the corporation has maintained an operating margin of $0.03 (3%) for every $1 of sales done. But it had turned to be a negative result of $0.03 per $1 of sales made after the expansion carried out in 2015(Table 2). Total asset turnover The asset turnover ratio “measures a company's ability to generate sales from its assets by comparing net sales with average total assets”(accountingtools). Corporations’ assets turnover ratio has decreased from $2.34 in 2014 to $2.10 in 2015. Where total assets of the corporation increased by $1,397,792 (95%) in 2015(Table