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Financial strengths and weaknesses of Primax, Alpha and Beta; - Essay Example

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One of the most popular tools of identifying financial strengths and weaknesses of an enterprise is through Accounting Ratio that could be used by a financial analyst to qualitatively evaluate the financial status and level of performance of an organization. …
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Financial strengths and weaknesses of Primax, Alpha and Beta;
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Download file to see previous pages Some accountants contend that Bank Overdraft should be treated as a long-term liability since that arrangement with the bank is is almost permanent (so long as the enterprise is a going concern). On the other hand, some accountants that contend that Bank Overdraft should be treated as a current liability since this facility may be withdrawn by the bank at any time. As a conservative measure of short-term financial position, Bank Overdraft has been considered as a current liability in the current instance. The current ratios of both the firms are nearly same but when compared to that of Primax both of them are well below the desired level. However, there could be firms that have low current ratios but work efficiently as is the case in fast food industry. This is so because current ratio does not analyze the quality of current assets which might contain obsolete stocks or slow paying and doubtful debtors. In the current instance it is observed that while Alpha has cash worth 43, Beta does not have any cash balances. Hence, though current ratio of Alpha is lesser than Beta, from a broader perspective, between the two; Alpha is in a better position than Beta (C. C. D. Consultants Inc. 2009). Quick Ratio = (Current Assets – Stock)/(Current Liabilities) Quick Ratio of Primax = (3399-1102)/1098 = 2.09 Quick Ratio of Alpha = (525-306)/745 = 0.29 Quick Ratio of Beta = (636-224)/853 = 0.48 If we consider Primax’s quick ratio as a benchmark, both these firms fall woefully short of that, but of the two, Beta seems to be in a better position provided of course its trade receivables are all good without any possibility of bad debts or slow recovery. Solvency Ratios Solvency Ratios evaluate long-term capability of a business...
One of the most popular tools of identifying financial strengths and weaknesses of an enterprise is through Accounting Ratio that could be used by a financial analyst to qualitatively evaluate the financial status and level of performance of an organization. This project analyses in detail financial strengths and weaknesses of Primax, Alpha and Beta; three firms engaged in manufacturing furniture. While Primax among them is most financially sound the other two firms are not doing that well financially. Any business consists of a series of interrelated processes that operate in tandem to produce the final output that the consumer wants. Kaplan and Norton have identified certain groups or bundle of activities that should be considered as independent units for the purpose of evaluating the efficiency of the entire business process. These independent units are: operations management, customer management, innovations, regulatory compliance and social responsibility in that order of importance. Efficiency of a business enterprise in each of these sectors should be independently measured and the overall efficiency of the business enterprise would be calculated as a weighted average of these independent measures. Unless an enterprise can satisfy its customers it cannot exist. The best way to do it is to identify the most profitable group of customers and focus marketing efforts in wooing this group. However, the costs of such an exercise should never exceed the tangible benefits obtained from it. ...Download file to see next pages Read More
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