FINANCIAL RATIOS ANALYSIS

Document Type:Essay

Subject Area:Business

Document 1

Below are the annual reports and financial ratios of Barclays PLC for the 2017 financial year. Debt to Equity Ratio The debt to equity ratio indicates the relevance proportion of the debt used in financing the projects and adding up the assets of the firm and the proportion of the shareholders. I order to derive the debt to equity of the firm the total liabilities of the firm are divided with the company assets both long and short term assets (Scarborough, 2016). In 2017 the debt to equity of Barclays PLC based on the declared company’s financial statement is 1. 61 which is higher than the industry debt to Equity in this case. This ratio means that the company cannot be able to pay its short term obligations because based on qualitative sense, the current ration less than one means that the company is on the wrong side and if it were to pay its short term liabilities it will not be able to pay them successfully but instead maybe it will have to dispose of its long term assets.

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For Barclays PLC this is a serious crisis that is awaiting the organization in the near future as it will totally not be able to meet its daily operations due to the high debts. The creditors as well will not be able to trust the company as this is what determine the credit records of the company. Quick Ratio The quick ratio is basically an indicator of the company’s short term liquidity position. It is its ability to be able to meet the short term obligations which include the operations of day to day operations. While computing the company’s working capital, working capital is usually divided by the gross sales which determine the relationship between the company and its debts especially on supplies and other petty transactions within the organization.

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The working capital ratio for Barclays PLC for the year 2017 was 1. 2 which indicates a good working capital for that year. It shows that the company is perfectly in a good position to comfortably cover its short term debts and investors are attracted by this ratio because they are assured of being paid their dividends in the long run. Even workers on short term contracts at least have confidence that they will be paid at the end of the day, they will be motivated adding value to the company leading to profitably in the near future. But will not guarantee investors high returns on investment on their shares alone because on stocks with lower ratios it can be assumed that the stock is being undervalued as per the economic conditions which will not actually gives a clear basis and stand.

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