Answer to Question #287348 in Accounting for Arslann

Question

1. Choose a Company (Example: Visa, Morrisons)

2. Choose 6 Ratios you want to analyze company’s Performance 

3. Prepare their formulas

4. Gather required data from financial statements 5. Apply Formulas on Excel

6. Comment on the Results 

7. Draw a conclusion if company is sustainable ​

Answer 1

Company chosen is Marrison

The ratios analyzed for the years 2009 and 2010 are as follows;

1) Acid test ratio

It measures the liquidity risk of an organization

This ratio decreased from 0.28 in 2009 to 0.24 in 2010. This shows that the ability to meet short liabilities for Marrison reduced and hence an increased liquidity risk.

2) Current Ratio

It shows the ability of a business to meet it's short liabilities. From the analysis, this ratio decreased from 0.53 in 2009 to 0.51 in 2010 indicating a reduced ability to meet its short term obligations.

3) Price Earnings ratio

From the analysis, the ratio was 12.09 and this shows that Marrison has a reduced confidence in the future market.

4) Earning per Share

The ratio increased from 0.17 in 2009 to 0.23 in 2010 indicating that earnings generated by the business were more available to shareholders in 2010 compared to 2009.

5) Return on Capital Employed

It measures the ability of an organization to utilize it's capital to generate profits. The ratio increased by0.26% from 2009 to 2010.

6) Net profit Margin

This ration increased from 4.62% in 2009 to 5.89% showing a reduction of expenses for Marrison and this makes it to try to reach the level of the market leader.