In: Accounting
a) short term solvency rate- current assets/current liabilities
=$220000/121000 =1.82:1
this ratio shows the liquidity capacity of the company. The ideal rate for this is2:1, company's ratio is close to that so company is doing good to maintain solvency.
b) short term debt rate= current assets/current liabilities
=$220000/121000 =1.82:1
this ratio shows the liquidity capacity of the company. The ideal rate for this is2:1, company's ratio is close to that so company is doing good to maintain solvency.
c) Inventory turnover rate= sales/inventory
$250000/50000
5 times
it shows how the business manages sales of its inventory so a high ratio is good. the company is doing good in this parameter
d)Average days of accounts receivable= accounts recievable/365
35000/365 =$95.9
it shows that how long a companies take to recieve due amount, the company would want to keep it low so that they can reinvest it in the business