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Analysis of a balance sheet

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Analysis of a balance sheet

Category: Case Study

Subcategory: Finance

Level: College

Pages: 1

Words: 275

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Date:
Liquidity state of the firm
This analysis will rely on two financial ratios to determine the liquidity state of the company
Current ratio; current asset/current liabilities
Quick ratio; (Current assets-inventory)/ current liabilities LINK Excel.Sheet.12 “Book1” “Sheet1!R1C1:R5C3” a f 5 h * MERGEFORMAT
Year 2018 (figures in HK Mil) Year 2017
(figures in HK Mil)
current asset 18,162.00 13,873.00
Inventory 1,932.00 1,887.00
Current liabilities 22,785.00 17,877.00
Total assets 75,790.00 73,313.00
(Drunk R Us Ltd, n.p)
The quick ratio for Drunk RUs Ltd for the year ending 2017 was 0.67while that for year ending 2018 was 0.71. This is an improvement. However, comparing with the current ratio of the firm for the year ending 2017 was 0.78 while that for the year ending 2018 was 0.79. These ratios are weak as the recommended ratio for quick ratio should be above 0.9 while that of current ratio should be above 1. Therefore, an investigation has to be done to unearth why current liability is high.
Solvency
This analysis will establish the debt level of the company using debt ratio (total debt/total assets). The debt analysis indicates that in the year 2017 the company had a debt ratio of 0.79 and in the year ending 2018 it had a debt ratio of 0.74. Though there is a decline in the reliance on debt, the ratio is too huge bearing in mind the recommended ratio is …

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