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The current ratio is estimated as follows: Current ratio Particulars Amount (2019) Amount (2020) Current Assets 1,779,097 4,287,653 (/) current liabilities 1,591,791 2,132,524 Current Ratio 1.12 2.01 The current ratio in both years is satisfactory but a higher ratio is more preferred. The ratio is estimated as follows: Accounts Receivable Turnover Particulars Amount (2019) Amount (2020) Sales 4,801,139 7,237,427 (/) Average Accounts Receivable 855,169 815,714 Accounts Receivable Turnover 5.61 8.87 The ratio in 2020 depicts that the corporation makes better use of its credit sales and therefore, it is more efficient in 2020. The ratio is estimated as follows: Accounts Payable Turnover Particulars Amount (2019) Amount (2020) Total Purchases 4,925,173 7,138,260 (/) Average Accounts Payable 746,358 651,619 Accounts Payable Turnover 6.60 10.95 A high ratio is better therefore, the corporation is more efficient in 2020. The ratio is estimated as follows: Inventory Turnover Amount (2019) Particulars Amount (2020) Cost of Goods Sold 3,917,144 4,387,010 (/) Average Inventory 567,979 580,312 Inventory Turnover 6.90 7.56 The corporation is more efficient in 2020 as compared to 2019.

The current ratio is estimated as follows: Current ratio Particulars Amount (2019) Amount (2020) Current Assets 1,779,097 4,287,653 (/) current liabilities 1,591,791 2,132,524 Current Ratio 1.12 2.01 The current ratio in both years is satisfactory but a higher ratio is more preferred. The ratio is estimated as follows: Accounts Receivable Turnover Particulars Amount (2019) Amount (2020) Sales 4,801,139 7,237,427 (/) Average Accounts Receivable 855,169 815,714 Accounts Receivable Turnover 5.61 8.87 The ratio in 2020 depicts that the corporation makes better use of its credit sales and therefore, it is more efficient in 2020. The ratio is estimated as follows: Accounts Payable Turnover Particulars Amount (2019) Amount (2020) Total Purchases 4,925,173 7,138,260 (/) Average Accounts Payable 746,358 651,619 Accounts Payable Turnover 6.60 10.95 A high ratio is better therefore, the corporation is more efficient in 2020. The ratio is estimated as follows: Inventory Turnover Amount (2019) Particulars Amount (2020) Cost of Goods Sold 3,917,144 4,387,010 (/) Average Inventory 567,979 580,312 Inventory Turnover 6.90 7.56 The corporation is more efficient in 2020 as compared to 2019.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Critically evaluate the ratios calculated below, and comment on your analysis.

The current ratio is estimated as follows: Current ratio Particulars Amount (2019) Amount (2020) Current Assets 1,779,097 4,287,653 (/) current liabilities 1,591, 791 2,132,524 Current Ratio 1.12 2.01 The current ratio in both years is satisfactory but a higher ratio is more preferred. The ratio is estimated as follows: Accounts Receivable Turnover Particulars Amount (2019) Amount (2020) Sales 4,801,139 7,237,427 (/) Average Accounts Receivable 855,169 815,714 Accounts Receivable Turnover 5.61 8.87 The ratio in 2020 depicts that the corporation makes better use of its credit sales and therefore, it is more efficient in 2020. The ratio is estimated as follows: Accounts Payable Turnover Particulars Amount (2019) Amount (2020) Total Purchases 4,925,173 7,138,260 (/) Average Accounts Payable 746,358 651,619 Accounts Payable Turnover 6.60 10.95 A high ratio is better therefore, the corporation is more efficient in 2020. The ratio is estimated as follows: Inventory Turnover Particulars Amount (2019) Amount (2020) Cost of Goods Sold 3,917,144 4,387,010 (/) Average Inventory 567,979 580,312 Inventory Turnover 6.90 7.56 The corporation is more efficient in 2020 as compared to 2019.
Transcribed Image Text:The current ratio is estimated as follows: Current ratio Particulars Amount (2019) Amount (2020) Current Assets 1,779,097 4,287,653 (/) current liabilities 1,591, 791 2,132,524 Current Ratio 1.12 2.01 The current ratio in both years is satisfactory but a higher ratio is more preferred. The ratio is estimated as follows: Accounts Receivable Turnover Particulars Amount (2019) Amount (2020) Sales 4,801,139 7,237,427 (/) Average Accounts Receivable 855,169 815,714 Accounts Receivable Turnover 5.61 8.87 The ratio in 2020 depicts that the corporation makes better use of its credit sales and therefore, it is more efficient in 2020. The ratio is estimated as follows: Accounts Payable Turnover Particulars Amount (2019) Amount (2020) Total Purchases 4,925,173 7,138,260 (/) Average Accounts Payable 746,358 651,619 Accounts Payable Turnover 6.60 10.95 A high ratio is better therefore, the corporation is more efficient in 2020. The ratio is estimated as follows: Inventory Turnover Particulars Amount (2019) Amount (2020) Cost of Goods Sold 3,917,144 4,387,010 (/) Average Inventory 567,979 580,312 Inventory Turnover 6.90 7.56 The corporation is more efficient in 2020 as compared to 2019.
The gross profit is estimated as follows: Gross Profit Margin Particulars Amount (2019) Amount (2020) Revenues 4,801,139 7,237,427 (-) Cost of Sales -3,917,144 -4,387,010 883,995 2,850,417 (/) Revenues Gross Profit Margin 4,801,139 7,237,427 18.41 39.38 The gross profit margin has increased in 2020, that is in 2020 there is more revenue. The net profit margin is as follows: Net Profit Margin Particulars Amount (2019) Amount (2020) 367,546 1,788,830 Net profit (/) Revenues Net Profit Margin 4,801,139 7,237,427 7.66 24.72 The net profit margin has increaséd from 2019 to 2020 due to the increase in revenues and net profit. The return on capital employed is computed as follows: Return on capital employed Amount (2019) Particulars Amount (2020) EBIT 523,588 2,165,551 (/) Current Assets - current liabilities 4,096,414 6,573,440 Return on capital employed 0.13 0.33 The return on capital employed has increased from 2019 to 2020 which means the earnings have increased from the capital employed. The quick ratio is computed as follows: Quick ratio Particulars Amount (2019) Amount (2020) 1,149,201 8,175,235 Current Assets - Inventories 1,591,791 2,132,524 (7) current liabilities 0.72 3.83 Quick Ratio A quick ratio of less than 1 is not ideal, therefore, the corporation was less liquid in 2019 as compared to 2020.
Transcribed Image Text:The gross profit is estimated as follows: Gross Profit Margin Particulars Amount (2019) Amount (2020) Revenues 4,801,139 7,237,427 (-) Cost of Sales -3,917,144 -4,387,010 883,995 2,850,417 (/) Revenues Gross Profit Margin 4,801,139 7,237,427 18.41 39.38 The gross profit margin has increased in 2020, that is in 2020 there is more revenue. The net profit margin is as follows: Net Profit Margin Particulars Amount (2019) Amount (2020) 367,546 1,788,830 Net profit (/) Revenues Net Profit Margin 4,801,139 7,237,427 7.66 24.72 The net profit margin has increaséd from 2019 to 2020 due to the increase in revenues and net profit. The return on capital employed is computed as follows: Return on capital employed Amount (2019) Particulars Amount (2020) EBIT 523,588 2,165,551 (/) Current Assets - current liabilities 4,096,414 6,573,440 Return on capital employed 0.13 0.33 The return on capital employed has increased from 2019 to 2020 which means the earnings have increased from the capital employed. The quick ratio is computed as follows: Quick ratio Particulars Amount (2019) Amount (2020) 1,149,201 8,175,235 Current Assets - Inventories 1,591,791 2,132,524 (7) current liabilities 0.72 3.83 Quick Ratio A quick ratio of less than 1 is not ideal, therefore, the corporation was less liquid in 2019 as compared to 2020.
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