ANALYSIS OF OUTSIDERS RATIO

1. Current Ratio

Current ratio is a financial ratio that measures whether or not a company has enough
resources to pay its debt over the next business cycle (usually 12 months) by
comparing firm's current assets to its current liabilities. The current ratio for Polycon
is below 1 for the year 2012 (current liabilities exceed current assets) which may be
alarming, indicating the company having problems paying its bills on time. However,
low values do not indicate a critical problem but should concern the management. In
2013, the company experienced operating efficiency, as the ratio was 1.1, which is
above 1 showing that the company was now more capable of paying its obligations
and providing additional cushion against unforeseeable contingencies that may arise
in the short term. Noteworthy is the fact that even such a high ratio is also not suitable
for the company as it demonstrated that the company has tied too many of its current
assets unproductively which can be used somewhere else to generate income. For
instance having too much of inventory can lead to such a high ratio.

2. Acid- Test Ratio

Acid test ratio depicts the most realistic approach of the company as it scrutinizes the
most liquid assets. For instance there is a increasing trend from 2011 to 2013 which
clearly depicts that the company is improving it position in securing more liquid
assets i.e. cash to cover it $ 1 of current liabilities and moving towards stability in
timely paying of the debts.

3. Gross Profit to Sales

This ratio shows the amount of money left from revenues after accounting for the
operating expenses. In 2012 the company had highest 14.29% gross profit margin,
which showed that the company had enough of revenues to account for the operating
expenses of the company at that time. In 2013, gross profit decreases due to the lesser
sales. The lesser sales is due to the lower production of products by the company so
does lower fianc cost and operating expenses in 2013.This is not an alarming
situation for the company, as it is not generating sufficient revenues to account for the
operating expenses. Thus company has a profitable position as they are incurring
profits more than its cost.