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Ratio Analysis of "Square Textiles Limited"

The document analyzes various financial ratios for Square Textiles Limited in 2007 and 2008. It provides the formulas and calculations for current ratio, quick ratio, receivables turnover, inventory turnover, and average days' inventory on hand. The current ratio decreased from 1.34 in 2007 to 1.26 in 2008, while the quick ratio increased from 0.55 to 0.64 over the same period. Receivables turnover was 0.61 times and inventory turnover was 3 times in 2008.

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Bijoy Salahuddin
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476 views

Ratio Analysis of "Square Textiles Limited"

The document analyzes various financial ratios for Square Textiles Limited in 2007 and 2008. It provides the formulas and calculations for current ratio, quick ratio, receivables turnover, inventory turnover, and average days' inventory on hand. The current ratio decreased from 1.34 in 2007 to 1.26 in 2008, while the quick ratio increased from 0.55 to 0.64 over the same period. Receivables turnover was 0.61 times and inventory turnover was 3 times in 2008.

Uploaded by

Bijoy Salahuddin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Ratio Analysis of Square Textiles Limited

Current Ratio:
A liquidity ratio that measures a companys ability to pay its short term obligations.
It is calculated by dividing current assets by current liabilities.
The Current Ratio formula is:
Current Assets
Current Liabilities

Computation:

In 2007
Current Ratio =

2 , 085 , 815 ,895


1 , 558 , 932 ,515
Current Ratio = 1.34

In 2008

Current Ratio =

3 , 437 ,049 , 714


2 ,722 , 233 , 092

Current Ratio = 1.26

Quick Ratio:
An indicator of a companys short-term liquidity. This quick ratio measures a companys ability to
meet its short term obligations with its most liquid assets.

The Quick Ratio Formula is:


Cash+ Marketable Securities+ Receivables
Current Liabilities

In 2007
Quick Ratio=

32 , 326 , 157+819 , 360 , 445


1 , 558 ,932 , 515
Quick Ratio = 0.55

In 2008

Quick Ratio=

44691475+1689670282
2722233092

Quick Ratio = 0.64

Receivables Turnover:
An accounting measure used to quantify a firms effectiveness in extending credit as well as
collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm
uses its assets.
The Receivables turnover formula is:

Net Sales
Average Accounts Receivables

Quick Ratio=

3052235640
(1689670282+ 819360445)/2

Receivables Turnover =0.61 times


Average days sales uncollected:

Inventory Turnover
Measure of relative size of inventory

The Inventory Turnover Formula is:


Cost of Goods Sold
Average Inventory
In 2008
Inventory Turnover=

2,589,019,736
(1,267,785,890+577,163,363)/2
Inventory turnover = 3 times

Average Days Inventory on hand:


The Average Days Inventory on hand Formula is:
Days year
Inventory turnover
Average Days Inventory on hand=

365
3

In 2008
Average Days Inventory on hand = 121.6 or 122 days

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