You are tasked with analyzing the last four years of accounts of a Essay

You are tasked with analyzing the last four years of accounts of a global mining company - Essay Example Graph 1 shows the company’s liquidity ratios over the four-year period. All the point ratios are less than one, and this means that performance of the company in management of short-term assets and liabilities is poor. In addition, current ratio and quick ratio have a declining trend, and this means that the organization’s management of liquidity worsened over the period. The two ratios, however improved from year 1 to year 2 before assuming the decreasing trend. Cash ratio reported an increasing trend but it was too low, with a maximum value of only 0.15. Correlation analysis of the ratios identifies a positive correlation between current ratio and quick ratio and a negative correlation between cash ratio and both current and quick ratio. Table 1 shows the correlation coefficients. Long-term solvency ratios are indicators of management’s efficiency in long-term management of resources. The ratios compare internal and external funding that an organization has and are inversely proportional to management efficiency (Thukaram 2007, p. 90). Times interest earned ration and cash coverage ratios are however inversely proportional to management efficiency (Mayes & Shank 2011, p. 118). From the graph, total debt ratio is low, over the entire period, and debt to equity ratio and equity multiplier ratio falls to lower values by year 1. The three ratios then decreases with time, indicating improved performance, which can be forecasted. Times-interest ratio and cash coverage ratio also show an improvement trend in performance because of their increasing trends over the period. Performance in management of long-term solvency is therefore strong and show improvement possibility. Asset turnover is another performance indicator that shows asset utilization in an organization. Inventory turnover, receivable turnover, and total asset turnover measures are directly proportional to management efficiency while days of realization and capital intensity are inversely