Assignment Task:
Task:
In this report we will compare Mo and Al companies performance in 2018 and 2019 and we will analysis the two companies financial performance.
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Get Help Now!1- Liquidity Analysis:
Above tables show that we have analyzed three important liquidity ratios: Current Ration, Quick Ratio, and Cash Ratio. All of these three indicators of liquidity have shown that both companies don’t have difficulties in meeting their financial obligations in the short term but Liquidity of M company for 2018 and 2019 is much better than A.
2- Turnover Ratio Analysis:
Above tables show that we have analyzed the cash conversion cycle , as we can see in 2019 and 2018 M was very efficient in using a company’s short-term assets ( inventory) and liabilities (Payable) for supporting sales. In contrast, both companies has high Receivable days which indicate that both business are investing in too many accounts receivable and need to improve their collection strategies because the high receivable days could lead to an excessive amount of bad debts. Also, we can notice that the working capital turnover for both companies has decreased from 2018 to 2019.
3- Operating Profitability Ratio:
From the above table we can noticed that the percentage of profit M produces from its total revenue in the 2018 and 2019 is better than A. Also, the return on capital employed of M in 2019 and 2018 is more effective and M was able to use the capital employed in the business to generate profits during 2018 and 2019 .
#2. Return on Equity of A shows the money invested by shareholders of the company was well used more than M company.
4- Business Risk Ratio Analysis:
Debt to Equity in the both companies have shown the proportion of a company's assets that is financed by debt is very low and both of the companies have more assets than the debt it owes, or we can say that, a greater portion of company's assets is funded by equity. Moreover the interest Coverage Ratio shows that M in the both years can cover its current interest payment with its available earnings more than A. Therefore, M has a lower risk of defaulting on its debt obligations.
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