Alaris Holdings Limited –

Current ratio = Current assets / current liabilities

2017

109424 / 76488

= 2.2

2016

199926 / 90558

= 1.43

 

The normal acceptance of current ratio is more than 1, which is indicates the capability of meeting the creditor’s obligations with the current assets. However, higher amount of current ratio is not acceptable as it might reflect the fault in working capital management policy of the company (Delen, Kuzey and Uyar, 2013). In this context, Alaris Holdings belongs to communication industry, antenna manufacturer and products related to radio frequency and wideband products. Hence, this company should not hold high inventories position in its balance sheet. The current ratio is normal for this company. With reference to the above calculation, the current ratio of the company is reduced to 1.43 from 2.2 in 2017. The reduction in trade receivables of the business is the reason behind such steep fall of current assets and so for the current ratio.

 

Quick ratio = (current assets – inventories) / current liabilities

2017

(199926-18040)/ 90558

=95832 /76488

=1.25

2016

(109424-13592) /76488

=181886 /90558

= 2.00

 

Quick ratio: The quick ratio is reduced from 2 to 1.25 due to reduction in trade receivables and cash position in the balance sheet of the company. The management has improved its receivable position in the current year as it has witnessed high amount of trade receivables in 2016 from the African countries (except South Africa). Moreover, the current year’s receivables have increased due to increase in European and South American’s position for receivables. However, majority of the receivables are less than 30 days old whereas only 210000 amounts are past due for more than 3 months (Alarisholdings.com, 2018). Hence, it can be said that current and quick ratio – both have improved for changing the receivable policy mainly.

 

Debt ratio = Total debt / total assets  

2017

77922/155752

= 0.5   

2016

144191/ 277837

0.51

 

The non-current liabilities have reduced largely as liability of preference share has become nil in 2017. The deferred tax liabilities of the company have reduced to 1073 from 2941 in the current year. However, total assets have reduced due to reduction of goodwill and receivables. Therefore, the reduction in total liabilities has not reflected in the debt ratio due to reduction of assets of the business. The debt ratio remains at the same stage in the last two years (0.51 to 0.5).

References

Delen, D., Kuzey, C. and Uyar, A., 2013. Measuring firm performance using financial ratios: A decision tree approach. Expert Systems with Applications, 40(10), pp.3970-3983.

Alarisholdings.com. (2018). Integrated annual report. [online] Available at: http://www.alarisholdings.com/wp-content/uploads/2017/10/Alaris-IAR-2017-FINAL-23-October-Web-Version.pdf [Accessed 14 May 2018].

 

 

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