Accounting Principles

Part B2: Interpretation of ratio analysis on liquidity and solvency (4 marks)
Use the liquidity and solvency ratios calculated in Part B1 and:
•Explain what liquidity and solvency ratios measure.
•Evaluate how each ratio has changed over time.
•Compare the two companies in relation to these ratios in terms of how the businesses are
funded by debt and equity and their financing costs.
•Identify any significant business factors that explain the changes in the ratios.
•Useful information can be obtained from the Annual Report, for example, the Directors’
Report, the Auditor’s Report, and the Notes to the Financial Statements. Other information
can be found in the textbook, lecture notes and Blackboard discussion forum.
•Be concise but informative in your discussion. Do not exceed the word limit of 750 words.
Text that exceeds the 750 words limit will be ignored.
ACCT5001 Group Assignment S1 2010 Final.doc 3/03/2010 5 of 9
To illustrate how to communicate the interpretation of ratio analysis in a report, follow the
examples in your textbook, Carlon et al. 2009, Ch. 1 pp. 44-52 which analyses and compares
Fantastic Holdings Ltd with Nick Scali Ltd.






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