PERSONAL FINANCIAL MANAGEMENT ASSIGNMENT 2
Question 1 (Buying a business)
You are required to calculate the following formulas and comment your findings.
Ratio Current year Comment
Liquidity
Current = Current Assets For every R1 owed short-term, the business
ratio Current liabilities has R3.35 available.
= 174600/52150 This is strong liquidity position (usually
healthy if above 2:1), suggesting that the
= 3.35:1
business should be able to meet its short-
term obligations comfortably.
Quick Excluding stock, the business has only 85c
ratio = Current Assets - Inventory to cover each R1 of short-term debt.
Current liabilities
This is below the ideal 1:1, meaning it relies
= (174600-13000)/52150 heavily on selling inventory to meet
obligations.
= 0.85:1
1
Question 1 (Buying a business)
You are required to calculate the following formulas and comment your findings.
Ratio Current year Comment
Liquidity
Current = Current Assets For every R1 owed short-term, the business
ratio Current liabilities has R3.35 available.
= 174600/52150 This is strong liquidity position (usually
healthy if above 2:1), suggesting that the
= 3.35:1
business should be able to meet its short-
term obligations comfortably.
Quick Excluding stock, the business has only 85c
ratio = Current Assets - Inventory to cover each R1 of short-term debt.
Current liabilities
This is below the ideal 1:1, meaning it relies
= (174600-13000)/52150 heavily on selling inventory to meet
obligations.
= 0.85:1
1
