Ratio Analysis Memorandum Essay Example | Topics and Well Written Essays - 500 words

Ratio Analysis Memorandum - Essay Example The solvency ratio looks at the organizations ability to pay long term debt and interest on debts (Bull, 2008). By looking at the debt to asset ratio it can be seen that the organization’s reliance on debt financing is increasing as this ratio has increased from 0.39 in 2008 to 0.79 in 2009. From the analysis the organization is generally still performing well, however, there is need to improve on the profitability of the organization which is decreasing from as seen in the analysis. This can be done by decreasing the expenses of the organization. The current and the quick ration also needs to be improved as they have both decreased in 2009 as compared to 2008 which is mainly contributed by the increase in the current portion of long term debt as per the Balance sheet. The organization needs to pay off these current liabilities in the shortest time possible for the improvement in the ratios to happen. The organization also needs to also reduce the solvency ratio by reducing its liabilities so as to ensure that the reliance on debt financing does not increase.