III. Analysis
Performance of Caltron Ltd. over the three years of operations as compared to the industry averages figures. Financial ratios approach is used to better understand the overall health of the company. Financial ratios can be divided into five categories. There are:
1. LIQUIDITY OR SOLVENCY RATIOS
a. Current Ratio
Theoretically, current ratio of 1 means that the company have cash and cash equivalents that are equal to current debt. Current ratio above 1 defines that company has sufficient cash and cash equivalents to pay back the current liabilities. While current ratio below 1 define that company lack of cash and cash equivalents to pay back the current liabilities.
In 2001 Caltron Ltd. has the current ratio of 2.99 and it proved that it has high liquidity due the current ratio higher than industry average of 2.7. During 2002 Caltron Ltd. has current ratio of 1.89, which is below the industry average but still manageable where any current ratio above than 1 still consider good liquidity measure of the company. However, in 2003, Caltron Ltd. has current ratio 1.39 which is lower than the previous year.
Caltron Ltd. has a slight higher current ratio in 2001 as
*…show more content…*

The industry average of electronic calculator manufacturing company was given 32days for account receivable turnover. For Caltron Ltd., in 2001 the account receivable turnover was 37days, in 2002 the account receivable turnover was 43days and in 2003 the account receivable turnover was 46days. It shows that Caltron Ltd. takes longer time to collect payment from their debtors as compared to the industry average. Over the years, the number of days needed to collect payment has increased once the sales have been made. This show a poor or week monitoring system of the receivable account and will probably give bad impact on the cash position of the

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