Cross Sectional Analysis Essay
According to the operating income return on investment ratio, Latitude Tree Holding Berhad has higher percentage than Eksons Corporation Berhad. Since the companies are responsible for maximizing profit based on investments they make in assets, Latitude Tree Holding Berhad has greater performance on their business compare to Eksons Corporation Berhad as the ROI is higher.
Based on the Inventory Turnover ratio, Latitude Tree Holding Berhad is leading by 4.74 …show more content…
(III) Liquidity Ratio 2013 | Eksons Corporation Berhad | Latitude Tree Holding Berhad | Current Ratio | 3.84 times | 1.43 times | Acid Test Ratio | 2.81 times | 0.87 times |
Current ratio measures the firm’s ability to meet its short term obligations (Gitman & Zutter, 2012). It is satisfactory if current ratio is between 1 and 3.The current ratio of Eksons Corporation Berhad in year 2013 was 3.84 which is higher than 3 indicates that anxiety over cash flows are removed but the idle cash are tied up unproductively, without investing in potential profitable projects which could affect future growth of the firm. However, Latitude Tree Holding Berhad current ratio was 1.43 which signifies excessive investment in their current asset. As a result, Latitude Tree Holding Berhad was more favorable to creditors.
Acid test ratio is a measure of how well a company can meet its short-term financial liabilities. Eksons Corporation Berhad has the acid test ratio of 2.81 in year 2013. This showed the company able to pay its short term debt from its current assets. It is vital that the