Balance sheet Essay Example | Topics and Well Written Essays - 500 words

Balance sheet - Essay ExampleHowever, the major underlying problem of Superior Foods is that total incumbent liabilities visualise has increased at a phenomenal rate of nearly 10% per annum during 2001 2003, whereas the growth rate of total current assets figure is well under 7% per annum. Therefore, it is justified to argue that Superior Foods current ratio has been constantly declining in last 3 years. Indeed, current ration was between 2.1 2.3 in 2001 and 2002 but reduced to 2.0 in 2003. This is an alarming trend because it may deteriorate liquidity position in next 5 years. 1) topical Ratio = Current Assets / Current Liabilities (in thousands of US $) = 83900 / 41950 = 2.00 2) Net Working Capital = Current Assets Current Liabilities = 83900 - 41950 = 41950 As far the liquidity / solvency of Superior Living is concerned, it should be pointed out that the current ratio indicates that for every $1 that Superior Living owes imminently, it has $2.0 of available liquid resource i n fiscal year 2003. The financial experts usually argue that an slight current is in the range of 1.5 2.0 because it enables the firms to easily pay off their debts and future financial obligations to creditors / lenders.