Accounting Final Report
1. Current Ratio
Current ratio is an indication of a company's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is. Current ratio is equal to current assets divided by current liabilities. If the current assets of a company are more than twice the current liabilities, then that company is generally considered to have good short-term financial strength. If current liabilities exceed current assets, then the company may have problems meeting its short-term obligations.
In the DXN Holdings Berhad, in 2005 the current assets are RM 90,782,666 and the current liabilities are RM 27,059,830, which equals 3.35. It means that for every dollar the company owes it has $3.35 available in current assets. But in 2006, the current assets for the company are RM 143,430,058 and the current liabilities are RM 35,121,066, which equals 4.08. It means that for every dollar the company owes it has $4.08 available in current assets.
From the data above, we can see that the ratio of the company increases from 3.35 to 4.08. It means that the company is generally considered to have good short-term financial strength. This ratio decreases in 2006 because the current assets and current liabilities in this year are decreasing.
http://www.investorwords.com/1258/current_ratio.html
http://en.wikipedia.org/wiki/Current_ratio
2. Acid-test
In finance, the Acid-test or quick ratio or liquid ratio measures the ability of a company to use its near cash or quick assets to immediately extinguish its current liabilities. Ideally, this figure should also be above 1 for the firm to be comfortable. That would mean that they can meet all their liabilities without having to sell any of their stock. If the figure is far below 1 they may begin to get worried about the firm's ability to meet its debts.
In the DXN Holdings Berhad, in 2005 the Investment + Receivables (net) equals to RM 90,782,666 -...
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