Instructions

For this assignment, use the BUS3061 Assignment u05a2 Template (listed under Resources).

On the template, you will find selected ratios for a company over a two-year period. Compare the ratios, and on a separate document (Word or Excel), submit your answers to the following questions:

What does the calculation of each ratio represent?

How does year one compare with year two, and what trend can be seen when you compare the two years?

Is the trend from year one to year two positive or negative?

What are the possible reasons for the trend?

What recommendations do you have for turning a negative trend to a positive trend?

**BUS3061 Fundamentals of Accounting**

Ratio

Year 1

Year 2

Current ratio

3.12:1

2.96:1

Quick ratio

1.34:1

1.02:1

Receivables turnover

9.7 times

10.2 times

Inventory turnover

2.4 times

2.3 times

Profit margin

11.4%

12.6%

Asset turnover

1.21 times

1.22 times

Return on assets

13.7%

15.4%

Return on equity

28.5%

29.3%

Price-earnings ratio

10.4 times

12.4 times

Debt ratio

50.2%

45.3%

Times interest earned

9.6 times

13.0 times