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business comment on ratios

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  • 21-12-2013 1:58am
    #1
    doogybag
    Registered Users Posts: 77 ✭✭


    hi, does anyone know what to say when they ask for comment on ratio?


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    #2
    d1234
    Registered Users Posts: 594 ✭✭✭d1234


    Firstly, state the result i.e. the profit margin for 2011 was 60% meanwhile in 2012 this was 50%

    Then, whether it has increased/decreased/improved etc ... this is a decrease of 10% and comment

    For the last section, comment again by comparing the two figures, the impact it will have on the business and how you think they could solve this problem (if there is a problem!) i.e. again, this decrease would have a negative effect on the business. I believe that this should be reviewed and a solution implemented such as increasing product prices etc etc.

    Good Luck!


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    #3
    doogybag
    Registered Users Posts: 77 ✭✭doogybag


    d1234 wrote: »
    Firstly, state the result i.e. the profit margin for 2011 was 60% meanwhile in 2012 this was 50%

    Then, whether it has increased/decreased/improved etc ... this is a decrease of 10% and comment

    For the last section, comment again by comparing the two figures, the impact it will have on the business and how you think they could solve this problem (if there is a problem!) i.e. again, this decrease would have a negative effect on the business. I believe that this should be reviewed and a solution implemented such as increasing product prices etc etc.

    Good Luck!


    ok thanks just where you said this is a decrease of 10% and comment ,what could you say there?


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    #4
    d1234
    Registered Users Posts: 594 ✭✭✭d1234


    This kinda overlaps with the third part a little - should have put that in!

    Here is the answer to the 2013 question issued by the sec:

    Leaving Certificate: Business – Higher Level 2013

    (b) Comment on the liquidity position of Sentry Ltd:

    Sentry Ltd has not managed to attain the recommended current ratio of 2:1.

    Sentry Ltd is not liquid and is over trading i.e. it cannot pay its debts as they arise.

    Sentry Ltd will have difficulty in raising cash quickly and paying its bills as they fall due.

    Maintaining a healthy working capital is essential to a businesses’ cash flow.

    However, this was not the case for Sentry Ltd with only €0.50 available to pay for every €1 of liabilities.


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