Gemini's Liquidity Ratios

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Gemini’s Liquidity, Efficiency, Solvency and Profitability Part a: Areas that improved & worsened Taking a look at liquidity ratios, Gemini Electronics is in a fairly good position. Gemini has improved the company’s current ratio. The idea behind the current ratio is to get an idea of whether Gemini has enough short-term assets to use to pay off short-term liabilities. Therefore, a higher current ratio is better. With regards to quick ratio, higher is better. However, in 2009 Gemini’s quick ratio has decreased very slightly. This could be due to the fact that quick ratio is more conservative, excluding inventory and other assets that can be more difficult to turn into cash quickly. This slight decrease would not be considered something to be overly concerned about at this point in time.…show more content…
borrowing money from the bank). Lower solvency ratios show that Gemini is in a stronger equity position in 2009 compared to 2008. However, Gemini’s solvency ratios are still above industry, which means there is room for further improvement. Debt ratio has remained below 1, showing the company has more assets than debt; therefore Gemini remains a low financial risk. Overall, profit has decreased from 2008 to 2009. This shows the company has become less profitable compared to the previous year. Although above industry in most cases, Gemini Electronics has earned less revenue for its investors this year. Although not immediately concerning, if a decrease in profitability continues this will create problems in the future for Gemini and the company’s investors. Part c: Overall impression of Gemini’s financial condition based on Ratio Analysis Overall, Gemini’s financial condition is strong. The company has continued to increase sales and generate profit above the industry. This has resulted in the company remaining a low financial risk for investors. Statement of Cash
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