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Question 5 Financial statement analysis and ratios 1 The following ratios were provided for Laura Ltd: RATIOS 2019 2020 2020 Industry Average Quick Ratio 1.2:1 0.4:1 1.1:1 Current Ratio 1.8:1 0.9:1 1.8:1 Inventory Turnover 16 times 12 times 18 times Average Collection Period of Receivables 30 days 60 days 20 days Debt Ratio 40% 60% 30%

Question 5 Financial statement analysis and ratios 1 The following ratios were provided for Laura Ltd: RATIOS 2019 2020 2020 Industry Average Quick Ratio 1.2:1 0.4:1 1.1:1 Current Ratio 1.8:1 0.9:1 1.8:1 Inventory Turnover 16 times 12 times 18 times Average Collection Period of Receivables 30 days 60 days 20 days Debt Ratio 40% 60% 30%

Survey of Accounting (Accounting I)
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter4: Accounting For Retail Operations
Section: Chapter Questions
Problem 4.2MBA: Sales transactions Using transactions listed in P4-2, indicate the effects of each transaction on...
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Question 5 Financial statement analysis and ratios 1 The following ratios were provided for Laura Ltd: RATIOS 2019 2020 2020 Industry Average Quick Ratio 1.2:1 0.4:1 1.1:1 Current Ratio 1.8:1 0.9:1 1.8:1 Inventory Turnover 16 times 12 times 18 times Average Collection Period of Receivables 30 days 60 days 20 days Debt Ratio 40% 60% 30% Profit Margin 20% 10% 25% Return on Assets 16% 8% 20% Note: Company credit payment terms for customers is 30 days. Required Given the above ratios, comment on the performance of Laura Ltd in relation to profitability, liquidity and financial stability in 2020. Include any possible problems and possible causes thereof. 1. Profitability (Profit Margin and Return on Total Assets) 2. Liquidity (Quick, Current, Inventory Turnover & Average Collection Period of Receivables) 3. Financial Stability/Solvency (Debt Ratio)
Transcribed Image Text:Question 5 Financial statement analysis and ratios 1 The following ratios were provided for Laura Ltd: RATIOS 2019 2020 2020 Industry Average Quick Ratio 1.2:1 0.4:1 1.1:1 Current Ratio 1.8:1 0.9:1 1.8:1 Inventory Turnover 16 times 12 times 18 times Average Collection Period of Receivables 30 days 60 days 20 days Debt Ratio 40% 60% 30% Profit Margin 20% 10% 25% Return on Assets 16% 8% 20% Note: Company credit payment terms for customers is 30 days. Required Given the above ratios, comment on the performance of Laura Ltd in relation to profitability, liquidity and financial stability in 2020. Include any possible problems and possible causes thereof. 1. Profitability (Profit Margin and Return on Total Assets) 2. Liquidity (Quick, Current, Inventory Turnover & Average Collection Period of Receivables) 3. Financial Stability/Solvency (Debt Ratio)
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