Complete 12 page APA formatted essay: WPP PLC Financial Report.The comparison of these ratios shows that current asset has not been utilized well as compared to fixed assets. The stock turnover ratio

Complete 12 page APA formatted essay: WPP PLC Financial Report.

The comparison of these ratios shows that current asset has not been utilized well as compared to fixed assets. The stock turnover ratio indicates that WPP PLC has replaced its stock almost 62.4 times during the year. In other words, it can be said that the company generated $62.4 worth of sales for every $1 invested in stock.

Debtor Day's Collection Period

Debtors__x 365

Cash Sales= 50 days

Creditor Day's Payment Period

Creditorsx 365

Purchases= 125 days

Difference between creditor and debtor days for 2004 is positive:

Creditor days - Debtor days= 125 days - 50 days= 75

The firm takes considerably longer (75 days longer, on average) to pay its creditors than it does to obtain payment from its debtors, having a good sign for the business.

4- LIQUIDITY

The ability of WPP PLC to 'pay its way' or to satisfy financial obligations without difficulty as and when they become due can be analyzed with the help of following ratios:

Current Ratio

Current Assets___

Current Liabilities= 0.87: 1

Acid Test (Or Quick) Ratio

Current Assets- Stock

Current Liabilities= 0.82: 1

Thus, the above ratios don't show a good position of the company in terms of its current assets and liabilities. It reveals that the company doesn't have enough liquid assets to pay off its short-term liabilities when they become due.

5- SOLVENCY

To obtain an indication of the company's longer-term solvency and its degree of financial risk, following ratios would be used:

Gearing (Or Leverage) Ratio

Total Debt Capitalx 100

Total Equity Capital= 33.28%

Debt Ratio

Total Debt Capital_________x 100

Total Assets (Fixed + Current)= 11.