FINANCIAL STATEMENT ANALYSIS Assignment Example | Topics and Well Written Essays - 250 words

FINANCIAL STATEMENT ANALYSIS - Assignment ExampleThe stolon store to be opened globally was in Middle East in Dubai.(i) Current balance The current proportionality signifies a companys competency to pay off its short destination obligations that is the ability to cover up short-term liabilities (debt and payables) with short-term assets ( exchange, list and receivables). The high schooler the current ratio, the higher the ability of the firm to payoff short-term obligations but it can also depict inefficiency in handling illiquid assets such(prenominal) as inventory. AEO depicts a favorable apparent motion in terms of this ratio as it has elevated from 2.9 in 2010 to 3.0 in 2011. In contrast with the industry average, the company has performed quite well. But such a high current ratio can also show inefficiency in handling illiquid assets such as inventory but this cannot be determined without the help of Quick ratio.(ii) Accounts Receivable Turnover This ratio talks slightl y the charge efficiency of a firm in collecting immediate payment from debtors who were sold goods on address by the firm the ratio is computed in times and shows how many times a firm generates and collects cash from debtors in a year. The higher the turnover, the more the efficient the firm is but this would also depict an self-asserting or tightened credit policy and can lead to lesser sales generation. American Eagle Outfitters trend of Accounts receivable turnover is favorable as it has increased from 2010 to 2011. This compared to the industry shows a way higher ratio and depicts that it operates a very aggressive credit policy.(iii) Inventory Turnover This ratio again comes under management efficiency of a company and depicts that how many times a year the inventory had been sold for cash and re-stocked the higher the turnover the more efficient the management of the firm is. The trend of this ratio is favorable for American Eagle as it has increased in the two years