Question

Using the correct formulas and a separate tab for each analysis, calculate the following ratios using Excel for Macys:

1. Three liquidity ratios for the past 3 years
2. Three solvency ratios for the past 3 years
3. Three profitability ratios for the past 3 years

Answer 1

1. liquidity ratios= Current Assets/ Current Liability

Where,

A. Current Assets = Stock, Debtor, Cash and bank, receivables, loan and advances, and other current assets.

B. Current Liability = Creditor, Short-term loan, bank overdraft, outstanding expenses, and other current liability

This ratio measures the financial strength of the company. Generally 2:1 is treated as the ideal ratio, but it depends on industry to industry.

2 solvency ratios=Solvency ratios also known as leverage ratios determine an entity’s ability to service its debt.

Here we will be looking at the four most important solvency ratios

Debt to Equity Ratio

Debt Ratio

Proprietary Ratio

Interest Coverage Ratio

3.Profitability ratios are financial metrics used by analysts and investors to measure and evaluate the ability of a company to generate income (profit) relative to revenue, balance sheet assets, operating costs, and shareholders’ equity during a specific period of time. They show how well a company utilizes its assets to produce profit and value to shareholders. are financial metrics used by analysts and investors to measure and evaluate the ability of a company to generate income (profit) relative to revenue, balance sheet assets, operating costs, and shareholders’ equity during a specific period of time. They show how well a company utilizes its assets to produce profit and value to shareholders.

Lond Term Debt = Debentures + Long Term Loans

Shareholders Funds = Equity Share Capital + Preference Share Capital + Reserves – Fictitious Assets

The debt-equity ratio holds a lot of significance. Firstly it is a great way for the company to measure its leverage or indebtedness. A low ratio means the firm is more financially secure, but it also means that the equity is diluted