25519731-ANALYSIS-OF-FINANCIAL-STATEMENTS-OF-FAUJI-FERTILIZERS

25519731-ANALYSIS-OF-FINANCIAL-STATEMENTS-OF-FAUJI-FERTILIZERS

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Unformatted text preview: 3 ANALYSIS OF FINANCIAL STATEMENTS OF CURRENT RATIO 0.2 0.4 0.6 0.8 1 1.2 2 4 2 5 2 6 2 7 2 8 CURRENT RATIO ACID TEST RATIO 0.2 0.4 0.6 0.8 1 2 4 2 5 2 6 2 7 2 8 ACID TEST RATIO 1. RATIO ANALYSIS: With Ratio analysis, we analyze financial statements with following types of ratios. LIQUIDITY RATIOS SR. NO RATIO TYPE YEAR 2004 2005 2006 2007 2008 1 CURRENT RATIO TIMES 1.09 0.91 0.90 0.94 0.82 ANALYSIS: The current ratio is decreasing continuously over the period; from 2004 to 2008.The liquidity of the company is decreasing. The ability to meet short term obligation has declined in 2008 with respect to prior years. Some corrective action should be taken by management to overcome the liquidity problem. SR. NO RATIO TYPE YEAR 2004 2005 2006 2007 2008 2 ACID TEST RATIO TIMES 0.87 0.69 0.61 0.68 0.54 ANALYSIS: Acid test ratio, which shows the ability to pay current obligation more quickly without considering inventory and prepaid expenses as liquid assets has decreased. Its shows that there is trouble to firm to meet its current obligation. This negative trend demands some corrective action from the CASH RATIO 0.32 0.33 0.34 0.35 0.36 0.37 0.38 0.39 2004 2005 2006 2007 2008 CASH RATIO NET WORKING CAPITAL-2500-2000-1500-1000-500 500 1000 2 4 2 5 2 6 2 7 2 8 NET WORKING CAPITAL management. SR. NO RATIO TYPE YEAR 2004 2005 2006 2007 2008 3 CASH RATIO TIMES 0.34 0.36 0.37 0.38 0.38 ANALYSIS: cash ratio is increasing slightly over the time period. The cash available to pay current liabilities is almost same from 2004 to 2008. So this ratio is satisfactory. SR. NO RATIO TYPE YEAR 2004 2005 2006 2007 2008 4 NET WORKING CAPITAL Rs 775 (1162) (1119) (666) (2114) ANALYSIS: The net working capital is also declining over the time period. The net working capital is negative except 2004. The situation is alarming. The ability to meet expenses for day to day operation shows constraints. The organization is in problem to meet its current obligations. ACCOUNT RECEIVABLE TURNOVER 5 10 15 20 25 30 35 40 2 4 2 5 2 6 2 7 2 8 ACCOUNT RECEIVABLE TURNOVER AVERAGE COLLECTION PERIOD 5 10 15 20 25 30 35 2 4 2 5 2 6 2 7 2 8 AVERAGE COLLECTIO N PERIOD ACTIVITY RATIOS SR. NO RATIO TYPE YEAR 2004 2005 2006 2007 2008 1 ACCOUNT RECEIVABLE TURNOVER TIMES 12.81 24.65 36.95 21.19 27.58 ANALYSIS: The number of times receivables are converted into cash has showed continuous increased from 2004 to 2006. In 2007 the accounts receivables turnover showed decline but again in 2008 it has showed increased. So improvement has been made in 2008 in collection of accounts receivables. So overall situation is quite satisfactory. SR. NO RATIO TYPE YEAR 2004 2005 2006 2007 2008 2 AVERAGE COLLECTION PERIOD DAYS 29 15 10 17 13 ANALYSIS: The number of days requires to collect receivables have decreased over the time; it shows the effective management of the credit department. So this ratio shows the positive trend as efficiency has improved. DAY SALES IN RECEIVABLES 5 10 15 20 25 30 35 2004 2005 2006 2007 2008...
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25519731-ANALYSIS-OF-FINANCIAL-STATEMENTS-OF-FAUJI-FERTILIZERS

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