In: Accounting
Wave Riders Ratio Formula |
Wave Riders Ratio |
Industry Ratios |
Comparative | |
Liquidity & Solvency Ratios |
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Current Ratio = Current Assets/Current Liabilities |
=147000/84500 | 1.74 | 2.1 | acceptable |
Quick Ratio =(Current Assets-Inventory)/Current Liabilities |
=(147000-100000)/ 84500 | 0.56 | 0.95 | Red Flag |
Debt Ratio =Total Liabilities/Total Assets |
=139500/152000 | 0.92 | 1.05 | acceptable |
Debt to Net Worth Ratio= Debt / Net Worth |
=55000/12500 | 4.40 | 8.5 | acceptable |
Times Interest Earned Ratio =(Operating Income+Depreciation) / Interest |
=15000/5000 | 3.00 | 4.2 | acceptable |
Return on Equity (ROE) =Net Income/Equity fund *100 |
=(7500/12500)*100 | 60% | 5.25 | acceptable |
Operating Ratios |
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Average Inventory Turnover Ratio = Cost of Goods Sold/ Avg Inventory |
= 255000 / (100000-50000) | 5.10 | 6.85 | acceptable |
To compute Avg Inventory, we have Closing Inventory as per the Balance Sheet, and the change in the Inventory from the Cash Flow Statement. There is a negative cgange in the Inventory for 100,000. So to compute the Avg Inventory, we reduce the half of the change in Inventory from the Closing Inventory Value. | ||||
Average Receivables Turnover Ratio = Net Sales/ Avg Receivables |
=500000/(10000-5000) | 100.00 | 10 | Red Flag |
Average Collection Period Ratio =365 days / Avg Recevables TO Ratio |
=365/100 | 3.65 | 36.5 | acceptable |
Payables Turnover Ratio = Total Purchase / Avg. Accounts Payable |
=255000/(74250+5125) | 3.21 | 5.8 | acceptable |
Average Payable Period Ratio =(Accounts Payable * 365) / Net Credit Purchases |
=(74250*365)/ 255000 | 106.28 | 62.9 | Red Flag |
Net Sales to Total Assets Ratio= Net Sales / Avg Total Assets |
=500000/(152000-2500) | 3.34 | 3.3 | acceptable |
Profitability Ratios |
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Net Profit on Sales Ratio =(Net Profit/Sales)*100 |
=(7500/500000)*100 | 1.50 | 4.80% | Red Flag |
Net Profit to Assets Ratio =(Net Profit/Assets)*100 |
=(7500/152000)*100 | 4.93 | 4.55% | Acceptable |
Net Profit to Equity Ratio =(Net Profit/Equity) |
=(7500/12500) | 0.60 | 1.8 | Acceptable |
The given Company is performing very Poorly as compared to the Industry Standards is shown by the detailed comparisons of various Ratios with the Industry Standard. | ||||
Each Ratio states different meanings, as given Below :- the Quick Ratio is very less, it should be maintained at 1 Avg Recevibles T/O Ratio is very high. We should make more sales in Cash instead of credit sales Avg Payable Ratio is also very high, this makes us loos credibility in market and we can not buy goods on credit basis and it may sometimes adversoly impact the business. Net Profit to Sales Ratio is very low as compared to the Industry, and so focus should be made in reducing Costs and Increasing the Sales. |