EAGLES LTD - FINANCIAL STATEMENTS ANALYSIS

Eagles Ltd - Financial Statements Analysis



Eagles Ltd - Financial Statements Analysis

Ratio Analysis teaches about accounts and businesses. When we use ratio analysis we can work out how money-making a business is, we can notify if it has sufficient cash to yield its accounts and we can even notify if its shareholders should be happy. (Richard, 2000, pp. 140-144)

In supplement to ratio analysis being part of an accounting and business investigations syllabus, it is a very helpful thing to understand anyway. (Gapenski , 1991, pp. 130-135)

Limitations of Ratio Analysis

In spite of numerous benefits, there are certain limitations of the ratio analysis techniques and they should be kept in brain while utilizing them in understanding financial statements. The next are the major limitations of accounting ratios: (Richard A. 2000, pp. 140-144)

Limited Comparability

Different firms apply distinct accounting policies. Therefore the ratio of one firm cannot habitually be in evaluation with the ratio of other firm. (Richard A. 2000, pp. 140-144)  

Qualitative Components are Ignored

Ratio analysis is a method of quantitative analysis and therefore, disregards qualitative components, which may be significant in conclusion making.

Effect of Price Level Changes

Price grade alterations often make the evaluation of numbers tough over a time span of time. Therefore, it is essential to make correct change for price-level alterations before any comparison. (Richard A. 2000, pp. 140-144) 

 

Costly Technique

Ratio analysis is an exorbitant method and can be utilized by large-scale business houses. Small business units are not adept to pay for it. (Richard A. 2000, pp. 140-144)

  

Financial Statement Analysis for 2008 and 2009 - Eagles Ltd

Ratio Analysis

From the ratio analysis it can be discerned that the Eagles Ltd was managing well in the year 2008 but the presentation of business proceeds up in the year 2009. The Gross Profit Margin is expanding in the year 2009 than that of 2008 but is still positive. However the position got better when we glimpse the Operating Profit Margin and Net Profit Margin. Both the ratios are contradictory in 2009, which displays that the Eagles Ltd is running in profit. The Return on Equity (ROE) for the year 2008 is affirmative but it is contradictory for the year 2009.

Current Ratio

The Current Ratio and the Net Working Capital has expanded in the year 2009, which displays an affirmative signal but this boost is due to the payments obtained from the debtors.

Overall, it is resolved that the financial place of the business is not good and the administration should take certain assesses in alignment to advance the presentation of the company. (Richard A. 2000, pp. 140-144)

 

Acid Test/Quick Ratio

It's a sign of a short-term liquidity. The fast ratio measures the Eagles' proficiency to meet its short-term obligations with its most fluid assets. It has 1.55 for 2008 and 1.53 for 2009.

   

Inventory Turnover

Inventory revenue is a formula that assesses the number of times inventory is traded or utilized over in a time span for example a year. The formula identical with the cost of items traded split up by the mean ...