Select the following ratios from each category for your analysis for last 3-5 years.
- Liquidity – Current ratio and Quick Ratio
- Profitability – Return on Equity ratio and Return on Assets ratio
You are required to analyse and interpret the above ratios using the theoretical concepts introduced in this subject to evaluate the company’s operations and performance. Then, upon collecting observations from the last 3–5 years and industry aggregates, answer the following:
- Based on a trend analysis, elaborate on whether the company you have chosen is improving or deteriorating in terms of its liquidity and profitability ratios, highlighting any areas (and appropriate actions) for improvement.
- How does the company compare to its peers, i.e. benchmarking? Comparison can be done from the industry- averages (or else, to those from its main competitor)? Would there be any issues of concern and, if so, how to address them?
- Is it possible to identify any relationship between liquidity and profitability ratios? Which is more important for the survival of the company in long run as well as short run?
- Calculate ‘Operating cycle’ and ‘Cash cycle’ of your selected manufacturing company. How does understanding of all the elements of the operating and cash cycle help in managing working capital efficiently.
The required word length for this assessment is1300 words (plus or minus 10%).