Financial Analysis of Manufacturing Midcap.doc

Financial Analysis of Manufacturing Midcap.doc - FINANCIAL...

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FINANCIAL MANAGEMENT – I Take Home Assignment Submission I Submitted By: Roll No. B11076 a. Short-term liquidity position (some popular ratios include Current ratio, Quick ratio, Average daily expenses, Cash cover for daily expenses, CA cover). Give your comments on which ratio is more suitable. What are the ratios conveying about your company and its peer. CURRENT RATIO Short Term Liquidity Position 2011-10 2010-09 2008-09 Current Ratio 2.11 2.27 2.34 Comments: The current ratio is the ratio of current asset to current liability. The current ratio has maintained itself from 2.34 to 2.11. The reduction of 23% in Current Ratio is due to increase in Current Liabilities. The liability increase is due to increase in advance payment of customers and sundry creditors. This shows that the company has more liquid cash at that point in time. This also follows benchmark of 1.5 – 2.0 QUICK RATIO Short Term Liquidity Position 2011-10 2010-09 2008-09 Quick Ratio 1.56 1.58 1.49 Comment: The quick ratio is the ratio between current asset that can be liquidated immediately or only the receivables that are good and expected within one financial year. It
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is a better indicator of liquidity. The company has maintained its QR at consistent level with marginal fluctuation only. The ratio shows that the company is less liquid. It may be recommended that the inventory management may be improved. AVERAGE DAILY EXPENSES Short Term Liquidity Position 2011-10 2010-09 2008-09 Avg. daily expenses 297.2463836 268.7192603 240.148411 Comment: The increase in spend value is depended on the availability of RM, Price of RM, inflation etc. The average expenses per day clearly shows the impact of raw material cost on product manufacturing. CASH COVER FOR DAILY EXPENSES Short Term Liquidity Positions 2010-11 2009-10 2008-09 2007-08 3876.28 1298.14 6105.87 752.24 Average Cash & Bank Balance 2587.21 3702.005 3429.055 Avg. daily Expenses 297.2463836 268.7192603 240.148411 Cash Cover for Daily Expenses 8.703924229 13.77647808 25.42540247 Comment: Cash cover for daily expenses shows the ability of the company to continue its operation with cash support. The decrease in value may indicate that the company has reduced its cash and bank balance. But this may also indicate that being a small company the firm has judiciously used the cash. CA COVER Short Term Liquidity Positions 2010-11 2009-10 2008-09 2007-08 Current Assets 106099.65 92625.7 100845.9 80963.7 Average Current Asset 99362.675 96735.8 90904.8 Average Daily Expenses 297.2463836 268.7192603 240.148411 CA Cover 334.2771535 359.9883384 378.5359213 Comment: This ratio also indicates the ability of the company without cash. Although the downward trend shows a poorer performance but for also indicates judicious usage of cash. It may be observed that the CA Cover is similar to its peer.
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Financial Analysis of Manufacturing Midcap.doc - FINANCIAL...

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