Vee-Jay Company (Pty) Ltd Extracted the following Ratios from its books for the year 2020 together with the relevant industry averages RATIOS 2020 Industry average 1. Current Ratio 1,9 2 2. Acid test ratio 0,8 1 3. Inventory Turnover 4 times 6 times 4. Debtors’ collection period (days) 51 days 40 days 5. Creditors payment period (days) 61 days 50 days Required: 1. For each of the above five ratios , answer the following : a) what does the ratio measure b) state whether there is an improvement or decline in the ratio in comparison with the industry average 2. Comment on the company’s overall liquidity position in comparison with industry.
Vee-Jay Company (Pty) Ltd Extracted the following Ratios from its books for the year 2020 together with the relevant industry averages
RATIOS
2020 Industry average
1.
2. Acid test ratio 0,8 1
3. Inventory Turnover 4 times 6 times
4. Debtors’ collection period (days) 51 days 40 days
5. Creditors payment period (days) 61 days 50 days
Required:
1. For each of the above five ratios , answer the following :
a) what does the ratio measure
b) state whether there is an improvement or decline in the ratio in comparison with the industry average
2. Comment on the company’s overall liquidity position in comparison with industry.
Ratio analysis is very important technique of management accounting, in which various calculations are made for analysis. For example, Current ratio, Acid Test ratio etc.
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