The aim of this report is to analyze the financial stability of the businesses Kurk Pty Ltd and Will Pty ltd. The financial stability is measured based on certain financial ratios and parameters. The financial parameters are calculated from the given annual report of both the businesses. The financial stability of the businesses is compared in this report with help of various calculations based on formulas.
The current ratio of Kurk Pty Ltd, is 1.95 and of Will Pty ltd. is 1.20. This indicates that Kurk Pty Ltd is more capable of paying its obligations than Will Pty Ltd (Groppelli, Angelico A.; and Ehsan Nikbakht, 2000).
Quick ratio is the indicator of company’s short term liquidity. The quick ratio of Kurk business is 1.23 and of Will business is 0.62. This indicates that the liquidity position of Kurk is much better than Will business.
The debt to total asset ratio is an indicator of financial leverage. Kurk Pty Ltd, has long term ratio is 0.12 and Will Pty Ltd. has long term ratio is 0.43.
Asset turnover ratio indicates the amount of revenue generated per dollar of assets. This overall indicates how efficiently the company is deploying its assets. Higher the asset turnover ratio means better for the company. In case of Kurk Pty Ltd and Wills Pty Ltd, the asset turnover ratio is higher in case of Wills Pty Ltd (Bodie, Zane; Alex Kane and Alan J. Marcus, 2004).
The inventory turnover ratio is an indicator of how many times a company’s inventory is sold and replaced. In case of Kurk Pty Ltd, the inventory turnover ratio is 6.98, though on other side the inventory turnover ratio for Wills Pty ltd is 1.22. Low turnover ratio for Will indicates that there is poor sales and therefore, excess inventory.