In analysing the financial statements of an entity, the following ratios were calculated: 2011 2012 Current ratio 2:1 1.3:1 Quick ratio 1:1 0.7:1 Receivables turnover (days) 30 45 Inventory turnover 3 times 4 times Profit margin 10% 7% Discuss any potential weaknesses that these ratios may reveal in the overall performance of the entity, and comment on possible causes for these results.

In analysing the financial statements of an entity, the following ratios were calculated: 2011 2012 Current ratio 2:1 1.3:1 Quick ratio 1:1 0.7:1 Receivables turnover (days) 30 45 Inventory turnover 3 times 4 times Profit margin 10% 7% Discuss any potential weaknesses that these ratios may reveal in the overall performance of the entity, and comment on possible causes for these results.

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter5: Evaluating Operating And Financial Performance

Section: Chapter Questions

Problem 8EP

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