Financial Ratios Analysis of Spire Limited for the Year 2014

What are the financial ratios calculated for Spire Limited for the year 2014, and what do they indicate about the company's performance?

Gross Profit Margin

Gross Profit Margin: Gross Profit Margin = (Gross Profit/Net Sales) × 100% Gross Profit = Net Sales – Cost of Goods Sold Gross Profit Margin = ($793700/$1672400) × 100% = 47.45%

Return on Assets

Return on Assets: Return on Assets = (Net Income / Average Total Assets) × 100% Return on Assets = ($216000/$641000) × 100% = 33.64%

Current Ratio

Current Ratio: Current Ratio = Current Assets / Current Liabilities Current Ratio = $638900 / $375900 = 1.70:1

Acid Test Ratio

Acid Test Ratio: Acid Test Ratio = (Current Assets - Inventories) / Current Liabilities Acid Test Ratio = 1.08:1

Analysis

Spire Limited's acid test ratio for the year 2014 is less than the industry average of 1.4:1, indicating weaker liquidity position compared to the industry. While the gross profit margin of 47.45% is good, the company needs to improve its liquidity position. The current ratio of 1.70:1 suggests that Spire Limited can meet its short-term obligations. In conclusion, the company's performance in terms of profitability is decent with a good gross profit margin, but its liquidity position needs attention to align with industry standards.

← Exploring external failure costs in business First mover advantages in business →