Engineering Solutions Pty Ltd (ES) Business Report
The following report provides an analysis and an evaluation of the significance of liquidity; solvency, profitability and efficiency for engineering solutions PTY ltd. Methods of analysis include the current ratio, debt to equity ratio, gross profit ratio, net profit ratio, return of equity ratio, expense ratio and the turnover of receivables. Results of the data highlight that all ratios are below the industry standard which raises concerns. Overall this report finds that the prospects of the company in its current position are not positive. There are many areas of weakness that can be addressed in order to increase financial stability, market share, profitability and compete in order to compete in a competitive environment. Recommendations discussed and not limited to
- Improving the average collection period
- Improving ways of production
- Allocating cash to increase equity
The following report does show some forms of analysis however comprises of limitations due to the lack of data provided, to reflect on previous years, current economic conditions.
Significance – factors affecting ES
Liquidity is a business’ ability to turn assets into cash in the short term to fund daily business activities. ES must take into account the liquidity of their assets in order to fund wages, equipment, short-term loan repayments and be able to fund unanticipated externalities. Solvency:
Solvency is the extent to which a business can meet its financial commitments in the long-term. This is important to ES as it indicates to the owners, shareholders and creditors the risks of the investments. Profitability:
Profitability is the ability of a business to maximise their profits. ES must ensure they maximise their profits as it satisfies both owners and shareholders in the short-term and longer term sustainability of the firm. Efficiency:
Efficiency is the ability of the business to...
Please join StudyMode to read the full document