Liquidity and Leverage Ratios’ Analysis for the year 2015-2016-2017
This study was performed to see financial methodologies of mentioned companies. Two types of financial ratios called Leverage ratio and liquidity ratios for the year 2015,2016, 2017 were used. Leverage ratios are used to show the abilities of a company to meet its obligations. Leverage ratios determine the financial health of an organization by looking at its balance sheet. These mentioned ratios are important for shareholders as they have the first claim against the assets of a company.
On the other hand, if we look at liquidity ratios then they help determine a firm’s ability to meet its short-term debt obligations. A liquidity ratio measures the extent to which a company is capable of paying its short-term liabilities or debt when payment time arrives. A high rate of liquidity ratio means that the company is safe and is fully capable of meeting its short-term liabilities it is a clear indication of good financial health.
Secondary data was required to complete this study, balance sheet, cash flow statement, liabilities, and assets statements were needed for completion of this study hence to fulfill this data requirement need all secondary data like balance sheet and cash flow statements were downloaded from mentioned company’s websites. Excel sheet was used to conduct formula calculations; data was represented in tables and charts. During ratio analysis, this study has found some true findings. As per finding, current ratio shows that Fauji fertilizer is at the top as compared to other two companies. In other finding, sales to working capital ratio show that Fauji fertilizer ratio is at the top position, the Current ratio of Fatima co. is lower than others it should reduce its current liabilities by converting these in assets. As far as Working capital of Fatima co. and Dawood co. are less so they should put try to control their short-term debts.
Liquidity ratios measure a firm’s ability to meet its current obligation
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