Ratio Analysis

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RATIO ANALYSIS
Ratios| 2007| 2008| 2009|
Current Ratio| 0.98| 0.79| 0.91|
Quick Ratio| 0.66| 0.41| 0.46|
Working Capital| (43318926)| (480192556)| (199882615)|

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2007
Current Ratio (C.R):-
It shows the relationship between size of current assets and size of current liabilities. Current Ratio=Current Assets (C.A)/Current Liabilities (C.L) The standard of current ratio is (2/1) means company must have “2” or twice assets to be paid out “1” liability. In this case company’s current ratio is 0.98 means it has 0.98 assets to be out “1” liability. So this company is not performing well and it is not up-to the mark (rule of thumb).It’s Current Assets are (2,049,482,448) and Current Liabilities are (2,092,801,374). Though it is not up to the mark but still it’s condition in 2007 is better as compared to 2008 and 2009. Moreover it’s liabilities is low compared with other years which means that company is satisfying it’s liabilities. By the satisfying of liabilities it gains the trust of creditors and stakeholders. Another reason is that it gave high amount of loans and advances to the others. Higher amount of loans and advances means that company was giving loans and advances to the others thereby gaining or earning income or profit from them in the form of interest. But the drawback of this company was his cash in bank, company’s condition could be more better by investing it’s idle cash in the business rather to keep it in bank. Quick Ratio (Q.R):-

It shows the relation between Quick Assets (most liquid current asset) and Current Liabilities. Quick Ratio=Quick Assets (Q.A)/Current Liabilities (C.L) The standard of quick ratio is (1/1) means company must have “1” assets to be paid out “1” liability. In this case company’s quick ratio is 0.66 means it has 0.66 assets to be paid out “1” liability. So this is not doing well and it is not up-to the mark (rule of thumb). It’s Quick Assets are (1,393,722,057) and Current Liabilities are (2,092,801,374). Though it is not up the mark but it’s performance in 2007 is better as compared to 2008 and 2009. There are many reasons that company‘s inventory is low. Low inventory may be due to low prices, high demand, good management, new technology, strong marketing strategies etc. Also it has low prepayments which clearly indicates that it is investing it’s cash in the business in order to expand. It’s receivables (11,779,550) and cash (252,964,526) both are in huge amount that is the reason of high quick ratio to the others. Working Capital (W.C):-

The standard of working capital is positive (+ve) means company should have positive working capital in order to attract the trust of creditors and stakeholders. In this case company don’t have positive working capital but it’s amount is negative which clearly indicates the bad condition of the company. But when we compare it with the 2008 and 2009 it needs less amount or profit or income to recover. Working capital will be positive on when there is excess of Current Assets over Current Liabilities but here working capital is negative means it’s Current Liabilities are greater than Current Assets. Another reason is it’s trade and other payables, and Deferred Liabilities are in huge figure that gets the W.C (working capital) in negative. But it is clear from it’s sales tax (high) that company sales in that year is boomed up. It’s revenue that why increased. 2008

Current Ratio (C.R):-
It shows the relationship between size of current assets and size of current liabilities. Current Ratio=Current Assets (C.A)/Current Liabilities (C.L) The standard of current ratio is (2/1) means company must have “2” or twice assets to be paid out “1” liability. In this case company’s current ratio is 0.79 means it has 0.79 assets to be out “1” liability. So...
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