Generally Accepted Accounting Principles Essay

Although dropping slenderly the second year they have managed to improve this in their third year increasing their overall favourableness natural rubber Styles has besides increased both(prenominal) its Return on Assets and Return on Equity, this demonstrates the ability of the companion to efficiently make use of its assets and equity which ultimately winces requirements for more funding and reduces cost making founder use of what they currently have. Efficiency Safety Styles Pty Ltd appears on average over the last three long time to be improving its efficiency to make better use of their assets and turning over their inventory.Safety should also focus on this area and strive to improve their efficiency. Whilst the values may seem quiet high their total sales amount has raised which may not be taken into account with averages. Safety Styles may need to revisit their inventory strategy as their turn over period is instead high this would be a turn a profit for them in the long term by having suppleer annoy to cash for investment in other assets. They should also pay forethought to their Accounts Receivable Turnover and post to reduce this. LiquidityWhilst Safety Styles Current ratio and Quick asset ratio is declined they are both still very healthy numbers. Safety Styles non-current assets have been increasing annually. They may want to pay attention to reducing their inventory levels and accounts receivable to give them more cash and the opportunity to invest into non-current assets or reduce their liabilities as they currently has a low level of cash compared to inventory and accounts receivable. This will make the smart set more liquid in the short term.Safety Styles also has a very healthy quick asset ratio compared to the industry standard of 2. It should be noted that Safety Styles currently do not have a high level of liabilities and seem to be maintaining their levels of dent in relation to their assets gravid Structure Safety Styles c urrently have a very low gearing ratio and are using retained earnings for most of their financing. External sources of financing will be a benefit to Safety Styles to help them grow and invest in additional non-current assets.