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Financial management - Essay Example

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Normally two ratios are being used to evaluate the liquidity of a company, they are the current ratio and quick ratio respectively. These ratios describe that how many current assets are required to fulfill the current liabilities. By using the data from each company’s financial statement we find out the current ratio of both companies. As in company A there is a large amount of assets to fullfill the liabilities of the company more efficiently as compared to the company B, so the current ratio of company A is 1 and a current ratio of company B is 0.4, the same situation is in the case of quick ratio. Quick ratio of company A is 1.02 and of the company B is 0.2. Quick ratio specifically measures the liquidity so the result shows that company A is more liquid as compared to the company B. (“HITSTELEC: Financial reports”) What do the accounts receivables turnover and inventory turnover of your company (Company (A)), compared with the other company, suggest about the company (A)’s ability to convert AR and Inventory accounts into cash? We compared account receivable turnover between company A and B, we know that account receivable turnover show that how many times companies receive payments from debtors. As the result show company A has the turnover of 8.8 times and company B has the turnover of 10.7 times, so it is clearly shown that company B has a high turnover as compared to company A. As we know inventory turnover means the cost of goods sold on an inventory recovered at a specific time. Again the company B has a high inventory turnover as compared to company A. Company A can convert account receivables into cash when it receives the debts from the debtors and this happen only when company issue debts on some specific terms and conditions or compensate the debtor that they can return their debt by their willingness. Company A can convert an inventory account into cash from the sale of inventory as possible as they can for this purpose it is necessary to reduce the cost of that inventory that every person can easily afford it. (“DU: Inventory”) Based on total debt ratio and the times interest earned, what is your assessment of the way your company (Company (A)) is financing its assets, compared with the other company? The total debt ratio and the times interest earned helps any company to finance its assets, as in the result of them company receive an amount regularly. Company A is using its debt ratio and interest earned to finance its assets, till its debt became not clear it is constantly receiving the interest on these debts. More it gives debt more it gets interesting. On the other hand company can also finance its assets by getting debt from other organizations on favorable conditions. While, in the comparison of debt ratio of company A and company B we came to know that the debt ratio of company A is 0.48 and the debt ratio of company B is 0.37 which is lower than the debt ratio of company A. So it is confirmed that the company A is making more investments for its assets as compared to the company B and it has more efficient debt policies. (“Debt Ratio”) Based on ROA, and ROE what is your assessment of your company’s (Company (A)) profitability, compared with the other company? Return on asset evaluate that how much of profits are generated from the assets. Return on equity is related to the ...Show more


Name: Course No.: Course name: Instructor: Date: Financial Management Introduction In this report we make the comparison of two companies to check the profitability, financial policies and strategies in accordance with all the operations of the company. Our selected companies are from the telecommunication sector named as Emirate Integrated Telecommunications Company PJSC as Company A and Hits Telecom Holding K.S.C., as company B…
Author : dschimmel
Financial management essay example
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