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Economic Environment and Financial Status of a Company - Essay Example
The present paper “Economic Environment and Financial Status of a Company” aims to assess the credibility of the company during 2009 and 2010. Credibility of a company could be decided through an evaluation of its financial performance over the years.
The economic environment of Little World Beverages Group might be regarded as having improved from the records of financial year 2008 to that in the financial year 2009. It experienced growth in terms of total operating revenues as well as net profit ratios by 18% and 51% respectively over the years. These improvements had essentially been due to expansions in the company’s base of operations over the years. It had moved on to international frontiers as well so that the company started experiencing economies of large scale operations (Little World Beverages Limited, 2009-10). As mentioned earlier, the financial evaluation of a company would be made on the basis of four groups of financial ratios each of which will be examining one particular aspect of the company’s profile. Information based on which these assessments are to be made will be available on the company annual reports.
Liquidity of a company decides the extent to which a company is capable to meet its short run obligations. In other words, how far a company is able to tackle its short run liabilities given its volume of assets is something that is conceptualized by the term short term solvency. It draws a comparison between the company liabilities and the volume of liquid assets possessed by the company. In case that the proportion of liquid assets is greater than the liabilities surmounting the company, it might be regarded as solvent over the short run (Wild, Subramanyam & Halsey, 2006). There are three ratios to determine short term solvency of a company. ...