Introductory Accounting Assignment free essay sample

This shows that the company has increased its assets (partly due to the fact that large amount of inventories were purchased) without a large increase in its liabilities. Company X has to focus on their liquidity position where concern is needed. The gearing and interest ratio of Company X showed that they have become less self-sufficient despite the reduction of debts in 2011. It could be due to the company decreasing its long-term liabilities and increasing its share capital and reserves. However, the interest cover ratio suggests hat the company’s profit may have decrease due to the fact that the company spent most of its profits and reserves paying off long-term liabilities without focusing on generating more revenue for 2011. Question 3 As a creditor, I would prefer to supply goods on credit to Blackmores. From what I observed, the liquidity ratios are greater than Company X which shows that Blackmores’ liquidity position is on the upper hand by taking both companies into account, due to the fact that they have more capability to pay off its obligations and are better equipped in terms of assets to cover its liabilities without selling its inventories. We will write a custom essay sample on Introductory Accounting Assignment or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page