Question
4 - The following ratios were calculated for Dynamic Data Ltd: [20 marks] RATIOS 2020 2021 2021 Industry Average Quick Ratio 1.2:1 0.6:1 1.0:1 Current
4 - The following ratios were calculated for Dynamic Data Ltd: [20 marks]
RATIOS | 2020 | 2021 | 2021 Industry Average |
Quick Ratio | 1.2:1 | 0.6:1 | 1.0:1 |
Current Ratio | 2.1:1 | 1.3:1 | 2.0:1 |
Inventory Turnover | 8 times | 11 times | 9 times |
Average Collection Period of Receivables | 32 days | 55 days | 30 days |
Equity Ratio | 70% | 40% | 60% |
Profit Margin | 15% | 10% | 20% |
Return on Ordinary Equity | 10% | 7.5% | 15% |
Note: The companys credit payment terms for customers is 30 days.
Required
Given the above ratios, comment on the performance of Dynamic Data Ltd in 2021 in relation to;
1. Profitability, 2. Liquidity, and
3. Financial stability (solvency)
Also include any possible problems and possible causes thereof and provide an overall conclusion of your analysis of the company.
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