executive summary :Engineering solutions is a small medium business that sells a large amount of products to help assist people in the mining industry .The business is trying to improve there financial situation and has hired Demaskens industries to help improve it .
Through this report we will show you
Liquidity : liquidity is the extent to which the business can meet its financial commitments in the short term. usually less then 12 months .
Liquidity is measured using the current ratio current = current assets
for engineering solutions PTY LTD
current ratio=550 000
110 000 =5:1
This shows that for every 1 dollar of current liabilities the business has $5 of current assets to pay for these liabilities
This shows that the buiz has a high level of liquidity , especially in relation to the industry average of the minding services sector which has a ratio of 2;1. the main area of concern for engineering solutions is the large amount of debtors and shock .
Solvency: solvency is making sure that the business has enough assets to cover its liabilities . Engineering solutions has to consider there cost of debt , there liquidity and purpose of there assets .
760000 = 51%
The business has 0.51 in external debt for every $1 of internal debt . A ratio of 1:1 indicates a sound position so engineering solutions shows a good level of solvency . This is close to there industry average which puts ES in a good position .
business profitability : Business profitability is to see how they generate there earnings compared to its expenses. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well. The industries average is 20% so...