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Simon Everly PLC Financial analysis and decision making - Essay Example

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Finance & Accounting
Pages 10 (2510 words)


Simon Everly PLC Financial analysis and decision making Tutor Institution Date QUESTION B: FINANCIAL STATUS OF SIMON EVERLY PLC In this section of financial analysis we will not discuss all the financial ratios calculated in question A (calculations in Appendix 1), but we will only interpret the financial ratios that are capable of showing us the financial status of Simon Everly PLC…

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Simon Everly PLC Financial analysis and decision making

INTERPRETATION OF LIQUIDITY RATIOS Liquidity of an organization is its ability to meet its short term duties (obligations), and it is amongst the major measures of organizations’ financial health (Brigham & Ehrhardt 2011). The liquidity ratios for Simon Everly PLC determined in this task involved: Current Ratio and Acid Test Ratio. Interpretation of the Current Ratio This ratio shows the ability of an organization to pay its short liabilities using its short term Assets (Brigham & Ehrhardt 2011). Current ratios of orgainzations should be equal to or more one (1). If the ratio is either equal to one (1) or more than one (1), the organization is capable of satisfying its short term obligations using its current Assets (Brigham & Ehrhardt 2011). A current ratio that is less than 1 (one), on the other hand, means that cannot satisfy the needs of its short term liabilities, and therefore, is facing liquidity problems (Brigham & Ehrhardt 2011). Simon Everly’s Current Ratio The current ratios for the organization as of the 2011/12 and 2010/2011 financial years were shown in the below: Current Ratio as of 2011/12 Financial year was 1.72. Current Ratio as of 2010/11 Financial year was 1.94. ...
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