Clintons

Introduction

The aim of this assignment is to interpret the accounts I have been given for Clinton Cards.

By the end of the assignment I am expected to present the following:

* Calculate ratios.

* Use financial ratio percentages interpreted from the final accounts.

* Understanding Clinton’s financial performance over a two year period.

What are Financial Ratios?

Financial ratios analysis is a process used to analyse a business’s financial outcome to measure the overall business performance.

All the information needed is obtained from the final accounts, which will give an indication into the businesses performance.

Ratios are always formed in two parts a numerator and a denominator.

Why are Financial Ratios used?

Financial ratios they are used to monitor the businesses overall financial performance, by being able to do this it enables the business’s to plan for the future.

For ratios to be most effective it is best to have at least two years worth of figures to be able to form a relationship between the figures, otherwise one year’s worth of figures there is basically useless.

Main Body

Liquidity Ratios

Identify the relationship between a business’s current assets and liabilities.

They are used to examine the funds cycle throughout the business to make sure that stocks and debtors are changed into cash to enable the owners to pay their creditors.

Current Ratio

The ratio will always have to be articulated as ‘something‘(3:1:2), there is no perfect ratio but it is expected to be larger than unity (1:1).

Current ratios assess solvency e.g. the businesses ability to pay its debts.

In 2009 there had been an increase by 0.52:1 from 2008’s figures showing that Clinton Cards had unproductive resources tying up a large fraction of the resources, whereas 2008’s figures prove that Clinton Cards utilised their resources productively.

Acid Test Ratio

In 2009 there had increased by 0.62 meaning for every £3.13 owed to Clinton Cards £1...