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Unit 7 - Written Assignment - Accounting PDF
Unit 7 - Written Assignment - Accounting PDF
financial statement inputs, ratio analysis can be categorized as profitability ratio analysis,
Each ratio is indicators, liquidity ratio measuring the companies ability to cover its current
liabilities when becomes due however solvency ratios measure, the company's ability to
cover its long-term debt, and leverage ratio is an indication of the healthiness of the
1- The profit margin ratio is one of the main profitability ratios which measures the
percentage of net income from total revenue and is calculated by dividing the net income by
total revenue.
2- Return on assets ratio measures the company's effectiveness of using its assets to generate
3- Current ratio is one of the liquidity ratios which measure the percentage of the current
4- Quick ratio is another type of liquidity ratio that measures how the company can use the
nearest cash to cover its current liability which is calculated by divided (current assets -
5- account receivable turnover ratio measures the effectiveness of the company collection as
6- Average collection period measures the number of days that account receivable spend
to be transferred cash during the year is derived by dividing the number of days of the year by
year.
7- average sales ratio measure the number of days of the inventory transferred to sales.
8- Debt to equity ratio is the financial ratio which measures the percentage of debt to equity.
In my opinion, Fashion-forward has a better profit margin and return on assets than dream
dream design is a better position on collection of the account receivable as it has higher
And also drea design is more secure than fashion because it has a lower debt to equity ratio.
Reference.
https://2012books.lardbucket.org/books/accounting-for-managers/index.html
Babalola, Y. A., & Abiola, F. R. (2013). Financial ratio analysis of firms: A tool for decision making.
Lumen Learning. (n.d.). The relationship between risk and capital budgeting. Boundless
Finance.
https://courses.lumenlearning.com/boundless-finance/chapter/the-relationship-between-risk-a
nd-capital-budgeting/