Analysing the liquidity of Starren PLC (trend analysis)

Analysing the liquidity of Starren PLC (trend analysis)

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Liquidity Ratios Current Ratio  current assets current liabilities Quick Ratio, or Acid Test current assets stocks current liabilities  Use of the Cash Flow Statement and its restatement to the Direct Method of Presentation from the usual Indirect Method of Presentation: i.e. recast as a receipts and payments account  Average Stock Turnover, or Average Stockholding  average stock 365 = number of days sales held in stock cost of sales  The actual Average Stock Turnover is  the cost of sales= number of times the average stock level is turned over (i.e. sold)
average stock  Debtors Average Settlement Period  average trade debtors 365 = average number of days credit allowed customers turnover  Or, as with stock, calculated as average debtor turnover  Creditors Average Settlement Period  average trade creditors x 365 = average number of days credit taken turnover  Again, it can be calculated as average creditor turnover  No Credit Interval average stockholding in days+debtors average settlement period in
days-creditors average settlement period in days It measures how long on average it takes to finance stock purchases
from initial stock purchase through payment to the supplier and the sale of the stock to the eventual payment by the customer. It highlights the additional burden on working capital (short term financing) of increases in trading activity. (Financial Statements will be provided in a separate attachment)

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