Exodus Venture Capital Ltd Assignment Example | Topics and Well Written Essays - 1500 words

Exodus Venture Capital Ltd - Assignment ExampleReferences 9 Exodus Venture Capital Ltd Investment Decision Introduction Every personal credit line that comes into existence has some objective. While for non-profit organizations, these might be service to humanity and meeting basic needs of communities, for commercial enterprises it is most certainly the profit pauperism that is the focus of attention for the owners and management. We see that both Brindley Ltd. and Haines Ltd. are in the same industry sector of building materials. It thus makes sense to compare results of those companies that are in the same industry sector and therefore are faced with the same opportunities and threats from the external environment. Meanwhile the internal structure and organization of a particular soused would signify its strengths and weaknesses. Industry averages as computed by pecuniary dailies like the fiscal Times and rating agencies such as Dunn & Bradstreet, Standard and Poor and Value d efine can also serve as a good baseline by which to compare and contrast the results of a particular firm (Weston et al, 2006, 73). The Importance of Financial Ratios In the absence of further information, financial ratios are a good way of determining the financial health and viability of a business enterprise. In another(prenominal) words, they give us a picture of the status of the business at a certain point in time. It has been agreed by the business and financial community that certain types of ratios are important to different stakeholders the world over. Thus we keep back different types of ratios as well such as liquidity ratios, profitability ratios, investment ratios etc. Debtors, creditors or investors, all these parties are interested in whether the business enterprise in question will be able to yield them their outstanding or give suitable returns on the capital invested in the business. Ratio analysis not only gives us a good thought process of this possibility but also a comparative picture of how the firm is doing in comparison to others in the same industry sector (Meigs & Meigs, 1993, 793). Thus hot websites such as Yahoo Finance not only have details of stock prices, fluctuations and ratios but also a comparison with industry averages. such comparisons help us reflect not only on company performance but policy as well. For example the company might have too lenient a credit policy which might create stuck up loans and liquidity problems. It may find it difficult to attract additional cash from the public via share issue if it has a poor record of dividend declaration and payment. Types of Financial Ratios The most common types of financial ratios are as follows 1. Short barrier Solvency/ Liquidity Ratios 2. Long condition Solvency/ Debt Equity Ratios 3. Profitability Ratios 4. Asset Utilization Ratios 5. Investment Ratios (Rao, 1992, 112) Evaluation of Brindley Ltd. & Haines Ltd. Using Financial Ratio Analysis Short Term Solvency / Liquidity Ratios 1. stream Ratio= Total Current Assets / Total Current Liabilities For Brindley Ltd. ? 910,000 / 520,000 = 1.75 1 For Haines Ltd. ? 1050,000 / 600,000 = 1.75 1 Incidentally, both companies have the same liquidity ratio so it seems both are equally preferred from the viewpoint of ratio analysis. 2. Quick/ Acid Test Ratio= Total Current Assets Inventories Trade Rec./ Total Current Liabilities For Brindley Ltd. ? 60,000 / 520,000 = 0.115 1 For Haines Ltd. ? 50,000 / 600,000 = 0.083 1 Here we can see that Brindley Ltd. is in a slightly better position than Haines Ltd. However both firms would be unable to decline their