Financial and Strategic Planning1 Coursework Example | Topics and Well Written Essays - 500 words

Financial and Strategic Planning1 - Coursework Example The current liabilities in 2011 decreased significantly by 0.54. This means that the institution’s ability to convert its services into cash has reduced in 2011. The working capital is a ratio that indicates whether a given company is in a position to cover its short term debt by purely using its short term assets. This is obtained by obtaining the difference between the Current Assets and Current Liabilities. The institution’s working capital is significantly positive. However, the working capital reduced from 2010 to 2011. This means that even though the company is able to pay off its debtors in the short-term, they are more prone to bankruptcy in 2011 than in 2010. The debt/equity ratio is a measure of a given firm’s leverage. It essentially gives the amount of the processes and procedures that are financed by liability and that financed by the shareholder’s equity. It shows a company’s financial position relative to debtors and shareholders. The institution’s leverage indicates that in 2011 the institution adopted a more aggressive debt financing technique for its growth. This may potentially lead to the institution realizing volatile earnings owing to the increase in interest as a result of an increase in debt. This is evident in the fact that even though the institution has adopted a more aggressive debt financing approach, revenue reduced from $1,500,000 in 2010 to $1,300,000 in 2011. This raises concern as debt is increasing while revenue is reducing, bringing down the financial position of the institution relative to its debt. This also considerably reduces the institution’s credit rating, lowering the institution’s ability to seek debt financing in the