O’zbekiston shampani

Calculation of liquidity ratios



The cash ratio is a measurement of a company's liquidity, specifically the ratio of a company's total cash and cash equivalents to its current liabilities. In our company the cash ratio was 0,07 or 0,12. Tt is better when cash ratio is between 0,5 and 1. So in 2018 company showed acceptable results. The quick ratio measures a company's capacity to pay its current liabilities without needing to sell its inventory or obtain additional financing. A good quick ratio is any number greater than 1.0. In our company good quick ratio was not observed. The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year. A good current ratio is between 1.2 to 2, which means that the business has 2 times more current assets than liabilities to covers its debts. It was at 1,31 in 2018 and increased to 2.12 and 1,97 in 2019 and 2020 respectively. Company’s position in 2018 and 2020 was acceptable as it was between 1.2 and 2.

شَاخِنَابَانُةٌ:

Financial analysis involves the selection, evaluation, and interpretation of financial data and other pertinent information to assist in evaluating the operating performance and financial condition of a company. The operating performance of a company is a measure of how well a company has used its resources—its assets, both tangible and intangible—to produce a return on its investment. The financial condition of a company is a measure of its ability to satisfy its obligations, such as the payment of interest on its debt in a timely manner. The analyst has many tools available in the analysis of financial information. These tools include financial ratio analysis and quantitative analysis. The analyst must understand how to use these tools, along with economics and accounting information, in the most effective manner.

Financial ratios relate or connect two amounts from a company's financial statements (balance sheet, income statement, statement of cash flows, etc.). The purpose of financial ratios is to enhance one's understanding of a company's operations, use of debt, etc.

The use of financial ratios is also referred to as financial ratio analysis or ratio analysis. That along with vertical analysis and horizontal analysis (all of which we discuss) are part of what is known as financial statement analysis.

Benefit of Financial Ratios

A significant benefit of calculating a company's financial ratios is being able to make comparisons with the following:

The averages for the industry in which the company operates

The ratios of another company in its industry
Its own ratios from previous years
Its planned ratios for the current and future years
The comparisons may direct attention to areas within a company that need improvement or where competitors are more successful.

Limitations of Financial Ratios

Some of the limitations of financial ratios are:

They are based on just a few amounts taken from the financial statements from a previous year. Current and future years could be different due to innovations, economic conditions, global competitors, etc.

The comparison is useful only with companies in the same industry. This becomes difficult when other companies operate in several industries and their financial statements report only consolidated amounts.

Companies may apply accounting principles differently. For instance, some U.S. companies use LIFO to assign costs to its inventory and cost of goods sold, while some use FIFO. Some companies will be more conservative when estimating the useful life of equipment, when recording an expenditure as an expense rather than as an asset, and more.

Since financial statements reflect the historical cost principle, some of a company's most valuable assets (trade names, logos, unique reputation, etc. that were developed internally) are not reported on the company's balance sheet.

They provide a minuscule amount of information compared to the information included in the five main financial statements and the publicly traded corporation's annual report to the U.S. Securities and Exchange Commission (SEC Form 10-K).

Our Discussion of 15 Financial Ratios
Our explanation will involve the following 15 common financial ratios:

Part 2: Financial ratios using balance sheet amounts

Ratio #1 Working capital
Ratio #2 Current ratio
Ratio #3 Quick (acid test) ratio
Ratio #4 Debt to equity ratio
Ratio #5 Debt to total assets