Financial Ratios and Current Ratio Essay Example

Table 1 portrays the segmentation of the financial ratio into four categories, namely liquidity, asset management, long-term debt payment ability and profitability. Liquidity ratios are particularly attractive to short-term creditors as they concentrate on current assets and liabilities. Additionally, as a standard guideline recommends that the current ratio should be at least 2:1. When observing Gemini Electronics' case, there is a noticeable consistency in their current ratio with a visible uptick in 2006.

We observe that Gemini Electronics has slightly less liquidity than the common business in the industry, as their current ratio falls below the industry's average. Both their fixed assets turnover and overall asset turnover fall short of the industry's average, suggesting a less effective utilization of assets by Gemini Electronics in generating sales compared to other businesses in the sector. Moreover, the