The table below is the key financial ratios of the DG Company for FY2020 compared to the industry benchmark KEY RATIOS DG Company Industry Benchmark Current ratio 1 82 60 Days in inventory 80 days 13 days Gross profit percentage 40 20 43 Accounts receivable turnover 8 62 29 10 Debt ratio 55 18 69 Debt to equity 1 23 2 23 Profit margin 6 61 1 7 The first part of this report shows whether or not any of the following red flags apply to DG Companyprimary Red flags Analysis (with reasons) 1 Movement of sales, inventory and receivables Red flag slow movement in inventory and receivables which is inconsistent with sales 2 Earnings problems No the company has increased earnings 3 Decreased cash flow Red flag the company's major source of cash is non current assets which cause cash shortage 4 Too much debt No the company's debt to equity ratio is lower than the industry benchmark which indicates the capacity to pay off debt easily 5 Inability to collect receivables Red flag account receivable is too slow which may suggest cash shortage may be looming 6 Build up of inventories Red flag days in inventory is 80 days which is way longer than competitors or this may suggest overstating inventory Risk Analysis Advise what financial status of DG company revealed in the financial statements Is it too risky, strong or growing, etc Outlook for Future Will DG company continue to grow Based on your understanding of the financial statements and the above analysis, what could be the strategies or plans for future business growth Business Goals Based on the above analysis, DG needs to achieve the following goals Short term goals Long term goal Checklist for Assessing Business Systems Requirements (Checklist Questions) Explanation 1 Does the business system require the user ID and password when logging in (Example only) This requirement addresses the need for a business system to provide access to authorised users only (Example only) 2 Managing and maintaning records 3 Creating records in context 4 Retention and disposal of records

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Posted on Jun 23, 2024

The table below is the key financial ratios of the DG Company for FY2020 compared to the industry benchmark:

KEY RATIOS	DG Company	Industry Benchmark
Current ratio	1.82	.60
Days in inventory	80 days	13 days
Gross profit percentage	40.20%	43%
Accounts receivable turnover	8.62	29.10
Debt ratio	55.18%	69%
Debt to equity	1.23	2.23
Profit margin	6.61%	1.7%

The first part of this report shows whether or not any of the following red flags apply to DG Companyprimary.

Red flags	Analysis (with reasons)
1	Movement of sales, inventory and receivables	Red flag - slow movement in inventory and receivables which is inconsistent with sales
2	Earnings problems	No - the company has increased earnings
3	Decreased cash flow	Red flag - the company's major source of cash is non-current assets which cause cash shortage
4	Too much debt	No - the company's debt to equity ratio is lower than the industry benchmark which indicates the capacity to pay off debt easily
5	Inability to collect receivables	Red flag - account receivable is too slow which may suggest cash shortage may be looming
6	Build-up of inventories	Red flag - days in inventory is 80 days which is way longer than competitors or this may suggest overstating inventory

Risk Analysis

Advise what financial status of DG company revealed in the financial statements. Is it too risky, strong or growing, etc.

Outlook for Future

Will DG company continue to grow?
Based on your understanding of the financial statements and the above analysis, what could be the strategies or plans for future business growth>

Business Goals

Based on the above analysis, DG needs to achieve the following goals:

Short-term goals

Long-term goal

Checklist for Assessing Business Systems

	Requirements (Checklist Questions)	Explanation
1	Does the business system require the user ID and password when logging in? (Example only)	This requirement addresses the need for a business system to provide access to authorised users only. (Example only)
2	Managing and maintaning records
3	Creating records in context
4	Retention and disposal of records