QUEENSLAND UNIVERSITY OF TECHNOLOGY
QUT Business School
School of Accountancy
BSB110: ACCOUNTING
SEMESTER ONE 2015 ASSESSMENT ITEM NUMBER 1: DECISION MAKING IN ACCOUNTING Part A
By John-Claude Vermaak Student Number: N9436936
Total
Word Count: 546
Recommendation
As appointed to the board of charitable trust, utilising the ‘Statement of Financial information as at 28/2/2015 and 01/3/2014’, I will be providing a clear recommendation to the board of charitable trust to which the trust should invest in.
Current Ratio
Eddison ltd is siting with a stronger ability to pay back short-term obligations, as founded conducting the' liquidity ratio' formula.
Quick Acid Test
Both Companies; ACDC ltd & Eddison ltd, display poor financial integrity, due to both ratio's working out less than 1. In order to cover current liabilities, inventory would have to be sold, as the companies both have a poor short-term assets base. ACDC Ltd is in a stronger position.
Inventory Turnover Ratio
ACDC Ltd is more favourable in relation to 'Inventory Turnover', which in turn means that the have a slight ease in selling inventory and receive cash for sooner.
Accounts Receivable Turnover
Both ACDC Ltd, and Eddison Ltd are competent in being able to collect cash from their creditors at relatively the same rate, which is fundamental to business cash flow and overall business success.
Day’s sales in receivables
Both companies measure very simular rates of days' sales in receivables, so both companies share a similar rate to collect receivables.
Debt Ratio
ACDC Ltd and Eddison Ltd have a large number of assets owned by the company and are not financed. As displayed this provides a large margin of safety to lenders.
Profit Margin
The profit margin of the net profit between ACDC Ltd and Eddison Ltd display, that Eddison Ltd excel in making a larger set of earnings from every dollar.
Rate of Return on Assets (ROA)
In a comparison between ACDC Ltd and Eddison Ltd, the rate of return on assets percentage for Eddison Ltd is slightly higher than ACDC Ltd. In conclusion Eddison Ltd has a higher success rate using assets to earn a profit within the business.
Rate of Return on Ordinary Shareholders’ Equity (ROE)
Eddison Ltd again have a higher rate of return on ordinary
