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The Jumbo Group: Basic Ratio Analysis, limitations of ratios

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Financial Statement Analysis

Briefing Note Financial Statements - JUMBO GROUP

The JUMBO GROUP has traded successfully for a number of years.. The Finance Department of ABC is preparing draft financial statements for the year ended 31st December 2009 for review by the company's Board of Directors. The draft financial statements, including comparatives, are shown in Appendix A. The Finance Director expects the Board to focus upon ABC's financial performance and has asked you to prepare a briefing note containing the information that will be required:


Prepare a briefing note for the Finance Director of JUMBO GROUP that includes:

1. Calculation of following Ratios
a. Working Capital
b. Current and Quick Ratio
c. No of days Payable
d. No of days receivable.

- A short discussion of other factors that have impacted the JUMBO GROUP's funding and liquidity position
- Three limitations of ratio analysis that could be relevant in JUMBO GROUP's situation.

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Solution Summary

The answer includes the calculation of the ratios along with the brief details regarding the factors which have impacted the funding and liquidity position of the company and the limitations of ratio analysis.