A

B

Profitability ratios are the ratios ability of the company to generate the revenue use it to settle the expenses. Under this category are the three main issues that have been calculated on gross profit ratio net profit ratios and return on capital employed.

It is clearly evident that the respondents have been higher in case of Ivory at 50.49% whereas that of Ebony is at 45.42% due to diversified sales of the company, on the other and happened higher in case of Ebony at 21.48% in comparison to Ivory. This is because the net profits for Ebony are higher despite the sales are lower than Ivory.

The return on capital employed defines the capital induced in the business and again it’s higher for Ebony at 23.64% and in case of Ivory it is at 10.90% only.
This clearly replying set the profitable position of Ebony is smooth and sound and better than Ivory.
Liquidity ratios are the ratios which describes the ability of the company to pay back the contractual obligations on time. In this scenario two ratios that have been considered are current ratio and quick ratio.

The current ratio of Ebony is 1.07 times and that of Ivory is 1.18 times due to huge amount of assets of current nature which can be used to settle the current liabilities are sufficient. The quick ratio on the other hand defines how quickly the current assets can be converted into liquid nature and in case of Ebony the ratio is 0.59 times whereas in case of Ivory it’s just 0.28 times which again implies that Ivory’s current ratio might be high but still the company is not having enough assets to be converted quickly.

Henceforth from the overall scenario it can be said that liquidity position of Ebony is sound in terms of overall liquidity analysis.

C

The firm can make some year-end changes to their fiscal reports, to improve their proportions. At that point the proportions wind up being only window dressing.

Ratios overlook the price level changes because of inflation prevalent in the market.

One of the limitations of ratios is that it totally overlooks the subjective parts of the firm. They just mull over the financial angles (quantitative)

There are no standard meanings of the ratios. So firms might be utilizing various equations for the proportions. One such model is Current Ratio, where a few firms think about every current obligation yet others disregard bank overdrafts from current liabilities while figuring current proportion.

Lastly, accounting ratios don’t resolve any monetary issues of the organization. They are a way to the end, not the genuine arrangement.

Question 3