make Liquidity Ratios ( working capital turnover, inventory turnover,receivables

Question

make Liquidity Ratios ( working capital turnover, inventory turnover,receivables turnover ratio and current ratio)

and are they in healthy condition?

Australian Agency for International Development INCOME STATEMENT For the year ended 30 June 2009 2009 Notes $000 INCOME Revenue Revenue from Govenment Sale of goods and rendering of services Total revenue 3A 130,219 738 130,957 108,506 109,068 Gains Other gains Total gains Total income 412 412 109.480 3C 548 548 131,505 EXPENSES 80,648 44,146 6,138 791 234 13 131,970 4A 4B 66.023 37,158 5,374 614 Employee benefits Depreciation and Finance costs Write-down and impairment of assets Losses from asset sales Total expenses 4D 4E 102 109,326 Surplus (Deficit) attributable to the Australian Government 154 The above statement should be read in conjunction with the accompanying notes.

Explanation / Answer

Working capital = Accounts Receivables + inventory - Accounts Payables

Working capital for the year 2009 = 21530 + 0 - 1172 = 20358

Working capital for the year 2008 = 14608 + 0 - 595 = 14013

Working capital turnover ratio = Sales / Average working capital = 130957 / ((20358+14013)/2)) = 7.62

Since there is no inventory on the balance sheet, we cannot calculate inventory turnover ratio

Receivables Turnover = Sales / Average Receivables = 130957 / ((21530+14608)/2)) = 7.25

Since the receivable turnover is less than working capital turnover, implies that company has more to get from creditors than it has to pay to its debtors. So its not a good sign.

Current Ratio = Current Assets /Current Liabilities = 24471 / 23542 = 1.04

Since this ratio is about 1, this is a good sign for the company

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