Assignment: Accounting for Decision Making

Liquidity, Solvency, Profitability, and Efficiency are the basic types of financial ratios. The liquidity ratio is the ratio of current assets to

Financial ratio analysis is a valuable tool that allows one to assess the success, potential failure or future prospects of the company (Bazley 2012). The ratios are helpful in spotting useful trends that can indicate the warning signs of

0-6 months, 6-18 months, 1-2 years, 2-3 years, 3-5 years, 5-7 years, 7-11 years, 11-16 years, 16-19 years.

Using Inventory Turnover to Calculate Average Days to Sell a Product. Once the inventory turn rate is calculated then calculating the number of days it takes for the power tool company to clear its inventory is 365 days divided by inventory turn rate of 5 times per year, take 365 ÷ 5. The answer 73 is the number of days it takes to go through its inventory. This method can also be used for benchmarking against companies in the same business. This will help compare the inventory turnover rates.

10. An investment of $1,000 today will grow to $1,100 in one year. What is the continuously compounded rate of return?

2. List the four basic types of financial ratios used to measure a company’s performance, give an example of each type of ratio and explain its significance.

What is the implied average collection period for the end of March? For the end of June?

This paper examines financial ratio analysis by defining, the three groups of stakeholders that use financial ratios, the five different kinds of ratios used and their applications, the analytical tools used in analysis, and finally financial ratio analysis limitations and benefits.

The semi-annual compounded interest rate is 5.2% (a six-month discount rate of 5.2/2 = 2.6%). (15 points)

6 + 2 + 1 + 9 + 5 + 2 + 1 = 26 minutes

5. P = $40({1 – [1/(1 + .03)]26 } / .03) + $1,000[1 / (1 + .03)26]

So time taken between shovel and crusher (twice) is 0.177 hrs, so each trip takes 0.0885hrs (5.31 mins).

The calculation of ratios is the calculation technique for analyzing a company’s financial performance that divides or standardize one accounting measure by another economically relevant measure. Financial ratios can be used as a tool to demonstrate financial statement users for making valid comparisons of firm operating performance, over time for the same firm and between comparable companies. External investors are mostly interested in gaining insights about a firm’s profitability, asset management, liquidity, and solvency.

Firms and Companies include ‘Ratios’ in their external report to which it can be referred as ‘highlights’. Only with the help of ratios the financial statements are meaningful. It is therefore, not surprising that ratio analysis feature are prominently in the literature on financial management. According to Mcleary (1992) ratio means “an expression of a relationship between any two figures or groups of figures in the financial statements of an undertaking”.

is previously known as Perlis Plantations Berhad. Its corporate head office is found in Kuala