ACTIVITY RATIOS
Activity ratios are financial analysis tools used to gauge the ability of a business to convert
various asset, liability and capital accounts into cash or sales. The faster a business is able
to convert its assets into cash or sales, the more efficient it runs. It is observed that the
receivable turnover in 2016 is lesser compared to that in 2015. The company could
improve this by tightening its credit policy. Its inventory turnover had higher results
compared to the previous year and the company can continue this performance by
efficiently using the inventories purchased.
LEVERAGE RATIOS
A leverage ratio is any one of several financial measurements that look at how much
capital comes in the form of debt (loans), or assesses the ability of a company to meet its
financial obligations. The debt of the company is observed to be higher than its equity.
This could be improved by not engaging into debts that are not necessary for the
operations of the company.
PROFITABILITY RATIOS
A profitability ratio is a measure of profitability, which is a way to measure a company's
performance. Profitability is simply the capacity to make a profit, and a profit is what is
left over from income earned after you have deducted all costs and expenses related to
earning the income. Assessing the profitability ratios of the company, although the
previous year’s ratios were of higher numbers, the company’s current profitability ratios
are still not as far as that of the previous year’s and therefore believed to be doing well.