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Ratio Analysis

Ratio Analysis

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Published by kash1976123

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Published by: kash1976123 on May 06, 2010
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07/22/2010

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Maqbool Textile Mills Limited
Ratio Analysis of Maqbool Textile
A) LIQUIDITY RATIOS
1).
Current Ratio
=
Current AssetsCurrent Liabilities
IN 2001
Current Ratio = 116271400127319089= 0.91
In 2002
Current Ratio = 149749085156352805= 0.95
COMMENTS
:
 In 2002 the current ratio is 0.95, which is by no meanacceptable. Although the value is better in 2002 as compared to 2001, but  still its is very low. The main reason is the Piling up of trade debtors, as theamount is quite high, also the company’s export are decreasing by the time.
2). Quick Ratio
= Current Assets InventoriesCurrent Liabilities
IN 2001
Quick Ratio = 116271400 - 43678000127319089 = 0.57: 1
IN 2002
Quick Ratio = 149749085 - 25816000156352805= 0.79 : 1
Institute Of Management Sciences
 
Maqbool Textile Mills Limited
 
COMMENTS
:
Quick ratio represents the assets, which can be disposed off more quickly. The values shows some betterment signs in 2002 as compared to2002 but still it is less than 1 and not fully acceptable. The main reason of improvement is the better consumption of inventory in 2002 as compared to 2001.
3). Net Working Capital
= Current Assets – Current Liabilities 
IN 2001
 Net Working Capital = 116271400 - 127319089= (11047689)
IN 2002
 Net Working Capital = 149749085 - 156352805 = (6603720)
COMMENTS:
 
The negative values shows that the condition of Maqbool Textilein 2002 remains unfavorable as in 2001.
Institute Of Management Sciences
 
Maqbool Textile Mills Limited
B) Activity Ratios
1).
 
Days Receivable Ratios
= Accounts Receivable *360Sales
IN 2001
Days Receivable Ratio = 23139446 * 360786188085= 10.5 days
IN 2002
Days Receivable Ratio = 56610924 * 360718763607 = 28.3 days
COMMENTS
:
 In 2001 days receivable 10.5 days it means that Accounts Receivable are converted into cash in such days it is much better because as thedays receivables increases the chances of bad debts increases. In 2002 daysreceivable increases to 28.3 days, which is not much better for the company.
2)
.
Inventory Days
= Inventory * 360CGS
IN 2001
Inventory Days = 43678000* 360708660640 = 22.1 days
IN 2002
Inventory Days = 25816000 * 360658592785 = 14.1 days
Institute Of Management Sciences

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