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Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy - Essay Example

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Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy

The cost of sales value includes the cost of resources utilized in the manufacturing of the products along with the labor expenses utilized in the production of the products. Thus, the cost of sales can be computed as, Cost of Sales = Opening Stock + Purchases – Closing Stock The computation of the cost of sales of a company does not comprise of any indirect costs involved in the process of sale of the products. Thus, the repair and maintenance charges, costs of depreciation of tools and equipments, rent expenditure, wages and charges of water and electricity have been excluded from the calculation of the cost of sales and hence from the computation of the gross profit of the company1. ...
pment Pty Ltd for previous year would be, = 51,213,100/107,043,200 = 0.478 = 47.8% Accordingly, gross income earned by Mark Equipment Pty Ltd for the present year was equivalent to 44% of its revenue generated for the same period, while the gross income of the company for the previous year was 47.8% of its revenue for the identical period. As a result, the restructures income statement of Mark Equipment would be as follows: Question 1 (b) Analysis of the Financial Position of Mark Equipment Pty Ltd For the analysis, the financial performances of Mark Equipment Pty Ltd have been reviewed and evaluated in certain key aspects, such as, Short-Term Liquidity; Long-Term Solvency; Asset Management; and Profitability for the present and the previous year. The short-term liquidity of the company and its ability to disburse of its immediate compulsions can be evaluated from the current ratio, the quick ratio and the cash ratio of the company. The current ratio of a company signifies its capability to pay off the short-term commitments in a prompt way and is hence helpful to understand the short-term solvency or liquidity of a company2. Current Ratio= Current Assets/ Current Liabilities Thus, for the previous year, Current Ratio of Mark Equipment Pty Ltd = 13119000/10237700 = 1.28 And for the present year, Current Ratio of Mark Equipment Pty Ltd = 36733500/27323300 = =1.34 The quick ratio of an organization shows the ability of the organization to meet its pressing obligations. Quick Ratio= Quick Assets/ Current Liabilities Thus, for the previous year, Quick Ratio of Mark Equipment Pty Ltd = 5642100/10237700 = 0.55 And for the present year, Quick Ratio of Mark Equipment Pty Ltd = 27442400/27323300 = =1.004 The cash ratio can be calculated as the ratio of summation of cash and ...Show more


Banking  Table of Contents Question 1 3 Question 1 (a) 3 Question 1 (b) 5 Question 2 11 Question 3 12 Question 4 13 Question 4 (a) 13 Question 4 (b) 13 Question 5 14 References 16 Bibliography 17 Appendices 18 Loan Amortization Schedule 18 Question 1 Question 1 (a) The Gross Income Margin is a financial measure to evaluate an organization’s financial wellbeing by disclosing the percentage of cash left after considering the cost of goods sold into account…
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Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy essay example
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