Financial Accounting Week 4- Individual Work Assignment

Financial Accounting Week 4- Individual Work - Assignment ExampleIf the solvency ratios reveal a higher turn, then the affair is worth to be tending(p) loan because it is in a position to meet its obligations. On the other hand, the liquidity ratios show that the business can comfortably convert its assets to meet its obligations. The following ratios will be used to test the business credibility for the loan.The working capital ratio is increasing as the historic period increases it is more in 2015 than in 22014. This shows that the business is doing quite well hence can manage its monetary obligations. It can therefore viable to be given loans.This indicates presence of working capital and the business is in a position to meet its financial obligations as the ratio increases with the change in the years. The banker on considering the flowing ratio will be able to approve the loan for the business this is because the banker will have confidence that the business will be able t o rejoin their loans without default given their wide financial stability, strength and base.This ratio gives the short term liquidity of a business. It is vital in the measuring of the business short debts in relation to its liquid assets. The higher the ratio the better the position of the business.it is calculated asSince there are no inventories, the quick ratio is resembling to the current ratio. From on the whole the above ratios, it is a clear indication that the business is in a position to meet its financial obligations, therefore the banker will be find it viable to advance the loan to the business.From the ratios calculated it is noted that the company has good performance as it is in a position to meet all its financial obligations both in the short-term and in the long-term. The leverage and solvency ratios are large showing that the company is very stable and has very good financial base. The company also enjoys very good returns as shown by