REQUIREMENT #9:

Compute for the following and narrate the computed financial ratios:

(See spreadsheet for the solution)

a. Quick Ratio = Php0.33

BISELCO accounts shows that in every Php1 debt, there is 0.33 liquid asset available. This means that
the company is not liquid enough to meets it current obligations. The results suggest to improve its
quick ratio by paying off the current bills and at the same time increase sales so that the cash on hand or
A/R increases. Furthermore, BISELCO needs to consider that quick ratio is the measure of liquidity of
one business and stakeholders closely look at this as their basis to extend their support so it is better to
keep this ratio improve and manage accordingly.

b. Current Ratio= Php0.35

Current Ratio is another way to measures the liquidity position of one business. It is much simpler
than quick ratio and very much useful to assess the health of the company. As per 2017 Annual Report
of BISELCO, its current ratio got only 0.35, which means that the company is not liquid enough to meet
its current obligation. Having a low current ratio is a direct sign of high risk of bankruptcy and it is highly
suggest to put an action and improvement for this. After all, effective management of liquidity leads to
improvement in profitability and thereby the wealth of the investors.

c. Debt Ratio= 0. 63 or 63%

The account of BISELCO reveals that 63% of the company's assets are financed by debts. Meaning,
liabilities are higher than its assets which is more than the half of it. The high the debt ratio, the higher
its risk for insolvency. The results indicates that BISELCO may be putting itself at a risk of default on its
loans, borrowing and credits and the creditors have more claims on the company’s assets. If the
company is liquidated, it might not be able to pay off all the liabilities with its assets. Therefore, BISELCO
must work towards improving its debt ratio.

d. Equity Ratio= 0.37 or 37%

This is the opposite analysis for debt ratio. BISELCO accounts shows that 37% of the company’s asset
are financed by investors. It means that the company resources are funded by contributions of it is
equity participants and its earnings by less than the half of it. The account of BISELCO got a low equity
ratio that indicates that they makes use more of debt in its funding and less of equity. For that, BISELCO
faced high risk of insolvency.

e. Debt Service Coverage Ratio= 1.14

In BISELCO account, it shows that the ability of the company to repay its borrowings is sufficient.
Having 1.14 as DSCR, it indicates “good and sufficient” which means that there is enough cash flow
available for the payment of current debt. Thus, it shows sound financial position of BISELCO.