Farm Branch Rentals - Essay Example

1. Accrued payments
2. Payables
3. And limited retained earnings
The accrued payments were a result of the rented equipment that their payments were to be made in the next financial year. The company had to pay salaries for its staff and rent for its hired premises. The company had some repairs to take care of on the rented truck that was to be used in the transportation of some of the items it ferried.

The company seems to have been using much of its retained earnings in settling its bills and also spending some on miscellaneous expenses that could have been omitted or settled in the next financial period. The company would have also opted to obtain loans from other financial institutions, this would have helped in increasing the company gearing very low ratio.
The company's current ratio is also negative this is a result of its payables being more than its receivables; the company has incurred a lot of accrued debts which are to be settled in the next financial year. These incurred debts tend to lower the company gearing ratio thus putting it in a bad financial position.
The company has no retained earnings as of the end of December. This is quite evident in its financial statements because of the little amounts that it has it uses in paying its declared dividends and some money in paying out its debtors whose debt periods are almost maturing. Read More