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Provide possible explanations for results for various ratios

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Reference no: EM132519551

The following financial ratios have been calculated for Nova Ltd for the year ended 30 June 2008:

                                      Actual results             Budgeted results           Previous year               Industry average

Current ratio                  1.97                         1.92                                1.87                        1.92

Quick asset ratio            1.06                          1.06                                1.06                         1.11

Inventory turnover          4.21                          4.91                                  4.86                      4.76

Net profit ratio                 0.05                          0.03                                   0.03                     0.03

Gross margin                       0.65                   0.59                                   0.61                      0.61

Required:

Question 1: Provide four (4) possible explanations for the results for the various ratios for Solar Ltd and outline their implications for the audit.

Reference no: EM132519551

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