Evidently, the researcher prefers the seminar’s financial statement ratio topic during the seminar’s duration, specifically the gearing ratio and the debt-to-equity ratio. The analysis enhances the managers’ decisions. The research focuses on the seminar’s experiences. The research focuses on the seminar’s significant lessons. Current events attest that current liabilities and other financial ratios augment the seminar’s gearing ratio topic.
Truly, the seminar generates significant experiences in terms of financial statement analysis. The seminar focuses on understanding the various financial statement ratios. Ratios are important tools for enhancing decisions. The seminar vividly shows that there are shortcomings in the gearing method (Drury, 2005).
Definitely, one of the shortcomings of the gearing ratio is the exclusion of the current ratio from the gearing ratio. The gearing ratio includes the long-term debt and the stockholders’ equity factors. The gearing ratio is used in the calculation of the company’s leverage. Normally, a company that has a higher leverage ratio has more risks compared to another company that has a lower leverage ratio. The higher leverage ratio indicates that the company has a higher long-term debt amount compared to the same company’s stockholders’ equity amount. A higher leverage ratio indicates that the company has a higher chance of falling into bankruptcy (Weygandt, 2005).
To improve the gearing ratio, the Blacks Leisure Company must include the current liabilities. The debt-to-equity ratio is an important analytical tool.
Table 1 shows that Blacks Leisure generated a lower 1.87 total debt ratio during 2011. The percentage amount is favourably lower than the 4.02 total debt-to-equity ratio generated during 2010. Consequently, the organization must pay higher interest for the bigger loans.
Table 1: Total Debt to Equity Ratio
Further, Table 2 analysis indicates that there is a favourable 53 per cent decrease in the total debt-to-equity ratio when comparing the 2010 and 2011 accounting periods. Table 3 shows that Blacks Leisure generated a lower.30 long-term debt to equity ratio during 2011. The percentage amount is favourably lower than the 54 long-term debt-to-equity ratio generated during 2010.
Table 2: Comparison Between 2010 and 2011
Table 3: Gearing Ratio
Further, the Table 4 analysis indicates that there is a favourable 44 per cent decrease in the total debt-to-equity ratio when comparing the 2010 and 2011 accounting periods.
Table 4
The tool is used in the financial statement analysis of Blacks Leisure financial reports. Using the seminar results, the debt-to-equity ratio includes all current liabilities in generating the resulting ratio (Gibson 2010). Blacks Leisure’s gearing ratio clearly shows that the company unfavourably increased its gearing ratio. The increase in the gearing ratio was done by increasing the company’s currently maturing long-term debts. Loan payments reduce the company’s gearing ratio (Moyer 2009).
In addition, the seminar’s financial statement topic includes other ratios. The other ratios enhance the decision-makers plans (Helfert 1997). The other ratios help the gearing ratio by offering relevant financial insights. For example, the net profit margin shows the relationship between net profit and net revenues. Table 5 shows that the company generated a 19 percent net loss ratio during 2010. In addition, the amount was favourably decreased to only 3 per cent net loss ratio during 2011. Further, Table 6 analysis indicates that there is a favourable 84 per cent decrease in the net loss ratio generated in 2010 (Warren 2009).
Table 5: Net Loss Ratio
Table 6: Comparison Between 2010 and 2011
Based on the above discussion, the researcher prefers the financial statement ratio topic during the seminar, specifically the gearing ratio and the debt to equity-ratio. The seminar topic enhances the current and future managers’ decisions. The seminar presents many significant lessons. Indeed, current events prove that the current liabilities and other financial ratios augment the seminar’s gearing ratio topic.
References
Blacks Leisure. 2011. Web.
Drury, C. (2005) Management Accounting For Business. London, Thompson Press.
Gibson, C. (2010) Financial Statement Analysis. London, Cengage Press.
Helfert, E. (1997) Techniques of Financial Analysis. London, Irwin Press.
Moyer, R. (2009) Contemporary Financial Management. London, Cengage Press.
Warren, C. (2009) Managerial Accounting. London, SouthWestern Press.
Weygandt, J. (2005) Managerial Accounting. London, Wiley & Sons.