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Accounting and Finance 1

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There is a favorable amount of increase in net profit margin of British airways this is because company may able to control its operating expenses as compare to past year for example British airways depreciation and amortization expense has decrease to 714m from 715m. Dbtor’s turnover ratio provides the days in which cash are received from the customers or sales are realized. Te ratio is helpful in indications of credit policy adopted by the company. Te turnover period will provide the detail to what extend companies credit customers to pay their dues.

Bitish airways again have shown efficiency in creditor turnover period. Cmpany period is shorter then pervious year period there is at least four days difference between them. Sorter period indicate that company does not have a going concern or any liquidity problems. is also indicate company credit rating is good and company consider and give importance to maintain its credit rating so it can obtain supplies from different suppliers. Te current asset ratio measures the adequacy of current assets to meet short-term liabilities. I reflects company is in the position to meet these liabilities as they fall due.

Taditionally, acurrent ratio of 2: 1or higher was regarded as appropriate for most of business to maintain there creditworthiness; hwever, mre recently a figure of 1. 51 is regard as normal. Cmpany vary in there size complexity and activities so it might be different for same business organization but having different size. Hre the British airways show weakness in meeting its current liabilities. Crrent asset ratio has fallen from past year. Tis indicates that company assets not enough to meet is upcoming liabilities.

Tis will result in loosing reputation in market. Cmpany credit limit will be increase. Cmpany will have to use their cash convertible to finance there liabilities. Te gearing ratios are calculated to see what proportion of total asset is financed by equity ratio and what by loans. Garing ratios also help the investor to see how much a company is drowned in loans. Cmpany having high gearing might lead to its liquidation or it may cause going concern problems. Erning share is of the most popular ratios among investor.

Tis shows how much return or the investor will earn on its investment. ES is also use in the. ..

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preview essay on Accounting and Finance 1
  • Pages: 4 (1000 words)
  • Document Type: Essay
  • Subject: Unsorted
  • Level: Undergraduate
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