E-revolution ompany Assignment Example | Topics and Well Written Essays - 1000 words

E-revolution ompany - Assignment Example The accounting report will show the analysis of the accounts to E-revolution Company. The report shows the analysis of the company by the use of financial ratios that are useful in determining the financial position of the company. The report shows the analysis of the company by the use of financial ratios that are useful in determining the financial position of the company. The report makes use of the following ratios, profitability ratios, liquidity ratios, and financial stability ratios. The profitability ratios are useful in showing the level at which the sales of the company are converted into profits and the efficiency at which that is done. The liquidity ratios indicate the ability of the company to deal with its financial obligations and the financial stability ratios indicate the level at which the operations of the company are dependent on debt as opposed to the equity of shareholders. The analysis deals with the month of April 2012 with comparison to march 2012. The report also contains recommendations that are useful for the prosperity of the business.E-revolution is found in the mobile industry which is among the fastest growing industries. The company is doing well in terms of its profit levels but that can be improved further by the use of a number of recommendations. The financial report will detail the transactions that took place in the financial year ending in April 2012 for e-revolution. The purpose of the report is to describe the financial and profitability position of the business in comparison with previous times. The report has been requested by the partners of the business who are interested in knowing the direction that the business is headed. The main concern for the owner of the business is the provision of good products and services, improvement of the market share, making money, ensuring debtors pay in a manner that is timely, paying bills on time and the management of inventory and tax obligations in a good manner. Ratio analysis 1. Gross profit margin The ratio indicates the ability of a company to convert its sales into profits. That should be done by the company reducing its costs incurred in the selling process so that the profits can increase. The ratio is calculated as; Gross profit / sales= $ 52,079.11/ 122,944.31 = 42.35% That indicates that the level of efficiency of e-revolution of converting sales into profits is equal to 42.35%. Profitability is among the concerns of Hopkins, the ratio above shows that the company is not doing badly in regards to profitability levels. 2. Current ratio The ratio is used to show the ability of a company to settle its short term financial obligation. The ratio is useful to indicate the ease at which a company can pay its financial obligation by the use of assets that are highly liquidable. That means that the current assets should be more than the current liabilities. Current ratio= current assets/ current liabilities =$90,761.29/ $26,868.93 =3.38 The results of th e ratio indicate that the company