Conclude whether the company is a good investment option based on the analysis conducted below. Current ratio:
Question:
Conclude whether the company is a good investment option based on the analysis conducted below.
Current ratio:
Period | 2022 ($’000) | 2021 ($,000) |
Current assets | 33,698 + 15,339 = 49,037 | 32,132 + 13,581 = 45,731 |
Current liabilities | 22,111 + 2,434 = 24,545 | 24,636 + 3,651 = 28,287 |
Current ratio (2022) = $49,037,000 / $24,545,000 = 1.99
Current ratio (2021) = $45,731,000 / $28,287,000 = 1.61
Debt-to-equity:
Period | 2022 ($’000) | 2021 ($,000) |
Current assets | 24,545 + 15,438 = 39,983 | 28,287 + 17,524 = 45,811 |
Current liabilities | 36,978 + 18,556 = 55,534 | 33,714 + 15,580 = 49,294 |
Debt-to-equity ratio (2022) = $39,983,000 / $55,534,000 = 0.720
Debt-to-equity ratio (2021) = $45,811,000 / $49,294,000 = 0.929
Return on total assets:
Period | 2022 ($’000) | 2021 ($,000) |
Net profit | 5,676 | 8,736 |
Total assets | 40,829 + 5,651 + 33,698 + 15,339 = 95,517 | 43,742 + 5,650 + 32,132 + 13,581 = 95,105 |
Based on average total assets – $95,311,000
ROTA (2022) = $5,676,000 / $95,311,000 = 0.060 or 6.0%
ROTA (2021) = $8,736,000 / $95,311,000 = 0.92 or 9.2%
Profit margin ratio:
Period | 2022 ($’000) | 2021 ($,000) |
Net profit | 5,676 | 8,736 |
Net sales (revenue) | 77,488 | 75,319 |
Profit margin ratio (2022) = $5,676,000 / $77,488,000 = 0.073 or 7.3%
Profit margin ratio (2021) = $8,736,000 / $75,319,000 = 0.116 or 11.6%
Expert Answer:
SOLUTION Based on the analysis of the financial ratios it is difficult to conclude whether the company is a good investment option without additional ... View the full answer
Intermediate Accounting IFRS
ISBN: 9781119607519
4th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
