Bus 5110 Managerial Accounting - Written Assignment Unit 7

1 | P a g e UNIVERSITY OF THE PEOPLE MASTERS IN BUSINESS ADMINISTRATION (MBA) BUS 5110: MANAGERIAL ACCOUNTING WRITTEN ASSIGNMENT UNIT 7 Case Study: Fashion Forward and Dream Designs DR JACENT GAYLE DECEMBER 20212 | P a g e We discussed the trends analysis in the discussion forum. However, sometimes administrators use different ratios to evaluate financial performance. The four ratios frequently used to assess financial health are ratios to measure productivity, temporary liquidity, lasting solvency, and market assessment (Heisinger & Hoyle, 2012). We use the following formulae to gauge productivity: Profit Margin = Net Profit / Net Sales Return on Assets = Net Profit / Average Total Assets We use the following formulae to measure temporary liquidity: Existing Rate = Existing Assets / Existing Liabilities Quick Rate = Cash + Marketable Securities + Short Term Receivables / Current Liabilities Account Receivable Turnover Rate = Credit Sales / Average Account Receivable Average Collection Period = 365 Days / Receivables Turnover Rate The Rate of Stock Turnover = Cost of Sales / Average Stock Average Sales Duration = 365 Days / Stock Turnover Rate Finally, we use the following formulae to measure lasting solvency: Liability To Equity = Total Liabilities