Reference no: EM133067940

Practical demonstration:

Monica works as a financial analyst for XYZ Ltd. The owner of the business wants her to perform an extensive analysis of financial statements. 

The owner wants the screenshots of the financial statement analysis performed as well as the notes in the presentation. The key elements that the owner is going to discuss in the presentation are as follows:

• the company's earning power
• the extent to which internal sources have been used to finance acquisitions of assets
• the speed with which accounts receivable are collected
• the ability of a business to quickly meet the unexpected demands for working capital
• the ability of the entity's earnings to cover its interest commitments
• the length of time taken by the business to sell its inventory

The financial statements of XYZ Ltd are shown below: 

Required: 

This task is to be performed in the classroom in front of the trainer/assessor. You trainer/assessor will observe you perform the following tasks: 

1. Using these statements of financial positions provided above, calculate in MS Excel, the ratios that give an indication of the following:

• a company's earning power
• the extent to which internal sources have been used to finance acquisitions of assets
• the speed with which accounts receivable are collected
• the ability of a business to meet quickly unexpected demands for working capital
• the ability of the entity's earnings to cover its interest commitments
• the length of time taken by the business to sell its inventory.

1. Provide a brief discussion on the suitability of the ratios mentioned for each case above.