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Deep Water Experts Financial Ratios - Assignment Example
Author : michelwalsh
Finance & Accounting
Pages 6 (1506 words)
Deep Water Experts Financial Ratios Analysis and Interpretation The task on hand is to compute for the company’s financial ratios for 2010 and 2011. Following the computation, an interpretation of the ratios obtained was done to analyze the financial position of the company, and to determine the overall performance with regard to its financial management…
Overall, the picture of the company’s financial health is quite promising, and a potential for expansion seemed to be a likely opportunity to explore. I. Short-term solvency or liquidity ratios Short-term solvency or Liquidity Ratios 2010 2011 Industry 1. Cash Ratio 1.08 1.56 0.21 2. Current Ratio 2.67 3.30 1.43 3. Interval Measure 96.92 n/a 4. Net working capital to total assets 0.12 0.17 n/a 5. Quick Ratio 1.80 2.20 0.38 Liquidity refers to the “availability of resources to meet short-term cash requirements” of the company (Larson and Jensen). In the case of Deep Water Experts’ finances, it refers to its ability to generate cash and cash-like assets to pay for its expenses as they come due, at least in the short-run horizon. Cash ratio indicates the amount of cash the company has for every unit of current liability falling due. In this area, the company has performed way better than the industry ratio. In 2011, it has a cash ratio of 1.56, which means that it has 1.56 Arab Emirates Dirham (AED) to cover each unit of current liability falling due. This is way better than the industry’s 0.21 per unit of current obligation. ...