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
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.