ACC506 Case Study Report Assignment Sample
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Performance of the company
In order to analyse the financial performance of Techworks, the accountant of the company used the ratio analysed technique. It is helpful for the company to determine the actual financial performance of the company.
Liquidity ratio – In the financial ratio technique, the liquidity ratio determines the performance of the company in the context of the managing the liquidity performance.
| Liquidity Ratio | ||
| Ratio | Formula | $ |
| Current ratio | (Current Assets/Current Liabilities) | 6.41 |
| Current Assets | 29,269.0 | |
| Current Liabilities | 4,564.0 | |
| Quick ratio | (Quick Assets/Current Liabilities) | 2.74 |
| Cash and cash equivalents | 12,524.0 | |
| Current Liabilities | 4,564.0 | |
Under the ratio analysis technique, liquidity performance of the company analysed. It determines the financial ability of the company to paying its short term debt. It defines that how effectively company meets with its short term debt. In this context, current ratio and quick ratio are calculated. The current ratio is found 6.41 that depicts that liquidity performance of the company is very good. The company is able to meet with the short term financial liability. Moreover, it is also found that quick ratio is 2.74 that is also good. It depicts that company is able meet short term liability in the quick manner (McKinney, 2015).
Assets management ratio – Assets management ratio is significant part of the financial ratios. In order to measure the ability of the management to use the organisational resources, assets management ratio is calculated. The below table shows the assets management ratio for Techworks:
| Assets Management ratio | ||
| Ratio | Formula | 2017 AUD -M |
| Average collection period | Account receivable / sales revenue * 365 | 46.50 |
| Account receivable | 2,050.0 | |
| Sales revenue | 16,090.0 | |
| Total asset turnover | Net Sales / Average total assets | 39.7% |
| Net Sales | 16,090.0 | |
| Total assets | 40,564.0 | |
The above table depicts that average collection period and total assets turnover ratio for Techworks under the assets management ratio. Moreover, it is also found that average collection period is calculated 46.50 days. It means that the company takes average 46.5 days to generate the cash from the debtors. At the same time, it is also found that total assets turnover is 39.7% for current financial year. It means that company is generating 39 cents against the one dollar investment in the business. In the context of this, it can be said that average collection period needs to improvement. It can be reduced by improving the credit policy and provide cash discount (Titman et al., 2010).
Debt management ratio – The main aim of the calculation of the debt management ratio is to measure the capital structure of the company. In this, it is found that debt ratio and debt to equity ratios are calculated:
| Debt Management Ratio | ||
| Ratio | Formula | 2017 AUD -M |
| Debt ratio | Total liabilities / total assets | 11.25% |
| Total liabilities | 4,564.0 | |
| Total assets | 40,564.0 | |
| Debt to equity | Total debt / total equity | 0.126 |
| Total debt | 40,564.0 | |
| Total equity | 36,000.0 | |
Under the debt management ratio, debt ratio compares the debt of the company with its assets. In this, it is found that debt ratio is 11.25% that it shows that company is able to meet with the liabilities by the assets of the company. Moreover, in the context of that debt equity ratio, it is found that it is 0.126 (Zietlow et al., 2011).
Profitability ratio: The profitability ratios shows that profitability of the company.
| Profitability Ratio | ||
| Ratio | Formula | 2017 AUD -M |
| Net profit margin | Net income / net sales
and the factors to determine if Juliet is ‘residing’ in Australia. Juliet satisfies one of the factors of being a resident, which is being physically present in Australia, from 1 st February 2015. But We can debate that she is not a resident, on the fact that, in the beginning she does not have a home in Australia as she gets on a bus trip for leisure for two months, to travel the whole country as she waits to begin her work, Also, Juliet sells her furniture and gives up the lease on the flat in London, she keeps the valuable antiques |
-248.82% |
| Net income | -63,005.0 | |
| Net sales | 25,322.0 | |
| Return on assets | Net income / total assets | -155.32% |
| Net income | -63,005.0 | |
| Total assets | 40,564.0 | |
| Return on equity | Net income / average Shareholder equity | -175.02% |
| Net income | -63,005.0 | |
| Shareholder equity | 35,999.0 | |
The above table shows that net profit margin ratio is found negative because company faced the loss in this year (Finkler et al., 2016). In this, it is found that net profit margin, return on assets and return on equity are -248.82%, -155.32% and 175.02%. It shows that performance of the company is very worst. The company needs to increased profit. From the above discussion, it is found that that liquidity performance of the company, debt to management, assets management ratios are showing that performance of the company is good. But, on the other hand, profitability performance of the company is not good, because company is faced a big loss in this financial year that is equal to $63005 (Barr, 2018).
References
Barr, M. J. (2018). Budgets and financial management in higher education. USA: John Wiley & Sons.
Finkler, S. A., Smith, D. L., Calabrese, T. D., & Purtell, R. M. (2016). Financial management for public, health, and not-for-profit organizations. USA: CQ Press.
McKinney, J. B. (2015). Effective financial management in public and nonprofit agencies. UK: ABC-CLIO.
Titman, S., Keown, A. J., & Martin, J. D. (2017). Financial management: Principles and applications. UK: Pearson.
Zietlow, J., Hankin, J. A., Seidner, A., & O’Brien, T. (2018). Financial management for nonprofit organizations: Policies and practices. USA: John Wiley & Sons.
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