Question

Hello, looking for help to answer the following questions. Would you please be able to fully answer the question in accordance with the question? I have calculated the different ratios however I do not know how to describe and evaluated it in 100 - 200 words which I would like some help on please.   Thank you very much.  

2018 2017 ($'000) Cash and Cash Equivalents Trade Receivables Inventories Total Current Assets Total Assets Total Current Liabilities Total Liabilities Retained Earnings Shareholders Equity 178,618 21,563 159,313 386,790 1,751,414 135,368 406,480 752,328 1,344,934 170,631 23,682 140,755 346,821 1,736,691 143,390 401,018 757,158 1,335,673 2018 Revenue from Sale of Goods Income Tax Expense Interest Expense (Finance Costs Cost of Sales Gross Profit 1,182,221 40,327 7,551 443,907 738,314 1,081,16.2 83,638 rating Expenses Profit After Tax 2018 133,851 88,468 158,099 Net Cash Provided Dividends paid Weighted Average Number of Ordinary Shares rating Activities Market Price per share (S) as at 27 July 2018 17.35 NAME AND CALCULATE YOUR RATIOS HERE (AS INDICATED BELOW): iquidity Ratios Current Ratio Current Assests/Current Liabilities Quick Ratio (Cash and cash equivalents+Trade Receivables)/Current Liabilities B14/B16 (811+812/(B16) 2.86 1.48 Solvency Ratios Times Interest Earned Profit before Interest and Tax/ Interest Expense Debt to Total Assets Total Liabilities/Total Assets 7.42(B29+B25+B24)/(B25) B17/B15 0.23 Profitability Ratios Return on Assets Profit after Tax / Average Total Asset Profit Margin Profit after Tax/Net Sales 0.05 B29/(B15+C15)/2) 0.07 -B29/B23 USING THE RATIOS YOU CALCULATED ABOVE, EVALUATE THE LIQUIDITY, SOLVENCY AND PROFITABILITY OF PREMIER INVESTMENTS EVALUATE THE LIQUIDITY, SOLVENCY AND PROFITABILITY RATIOS HERE (100-200 WORDS)

Answer 1

The current ratio is a liquidity ratio that measures whether or not a firm has enough resources to meet its short-term obligations. It compares a firm's current assets to its current liabilities, and is expressed as follows: The current ratio is an indication of a firm's liquidity.

Liquidity is the ability to convert assets into cash quickly and cheaply. Liquidity ratios are most useful when they are used in comparative form. This analysis may be internal or external.

For example, internal analysis regarding liquidity ratios involves using multiple accounting periods that are reported using the same accounting methods. Comparing previous time periods to current operations allows analysts to track changes in the business. In general, a higher liquidity ratio shows a company is more liquid and has better coverage of outstanding debts.

current ratio measures a company's ability to pay off its current liabilities (payable within one year) with its current assets such as cash, accounts receivable and inventories. The higher the ratio, the better the company's liquidity position:

The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets and therefore excludes inventories from its current assets

The solvency ratio is a key metric used to measure an enterprise’s ability to meet its debt obligations and is used often by prospective business lenders. The solvency ratio indicates whether a company’s cash flow is sufficient to meet its short-and long-term liabilities. The lower a company's solvency ratio, the greater the probability that it will default on its debt obligations.As a general rule of thumb, a solvency ratio higher than 20% is considered to be financially sound; however, solvency ratios vary from industry to industry. A company’s solvency ratio should, therefore, be compared with its competitors in the same industry rather than viewed in isolation.

Profitability ratios are a class of financial metrics that are used to assess a business's ability to generate earnings relative to its revenue, operating costs, balance sheet assets, and shareholders' equity over time, using data from a specific point in time.For most profitability ratios, having a higher value relative to a competitor's ratio or relative to the same ratio from a previous period indicates that the company is doing well. Ratios are most informative and useful when used to compare a subject company to other, similar companies, the company's own history, or average ratios for the company's industry as a whole.For example, gross profit margin is one of the most often-used profitably or margin ratios. Some industries experience seasonality in their operations, such as the retail industry. Retailers typically experience significantly higher revenues and earnings during the year-end holiday season. It would not be useful to compare a retailer's fourth-quarter gross profit margin with its first-quarter gross profit margin because it would not reveal directly comparable information. Comparing a retailer's fourth-quarter profit margin with its fourth-quarter profit margin from the same period a year before would be far more informative.

Profitability ratios are the most popular metrics used in financial analysis, and they generally fall into two categories: margin ratios and return ratios. Margin ratios give insight, from several different angles, on a company's ability to turn sales into profit.Return ratios offer several different ways to examine how well a company generates a return for its shareholders. Some examples of profitability ratios are profit margin, return on assets (ROA) and return on equity (ROE)

Return Ratios: Return on Assets

Profitability is assessed relative to costs and expenses, and it is analyzed in comparison to assets to see how effective a company is in deploying assets to generate sales and eventually profits. The term return in the ROA ratio customarily refers to net profit or net income, the amount of earnings from sales after all costs, expenses, and taxes.The more assets a company has amassed, the more sales and potentially more profits the company may generate. As economies of scale help lower costs and improve margins, returns may grow at a faster rate than assets, ultimately increasing return on assets.

Margin Ratios: Profit Margin

Different profit margins are used to measure a company's profitability at various cost levels, including gross margin, operating margin, pretax margin, and net profit margin. The margins shrink as layers of additional costs are taken into consideration, such as the cost of goods sold (COGS), operating and nonoperating expenses, and taxes paid.Gross margin measures how much a company can mark up sales above COGS. Operating margin is the percentage of sales left after covering additional operating expenses. The pretax margin shows a company's profitability after further accounting for non-operating expenses. Net profit margin concerns a company's ability to generate earnings after taxes.