What are the financial ratios calculated for Spire Limited for the year 2014, and what do they indicate about the company's performance?
Gross Profit Margin
Gross Profit Margin: Gross Profit Margin = (Gross Profit/Net Sales) × 100%
Gross Profit = Net Sales – Cost of Goods Sold
Gross Profit Margin = ($793700/$1672400) × 100% = 47.45%
Return on Assets
Return on Assets: Return on Assets = (Net Income / Average Total Assets) × 100%
Return on Assets = ($216000/$641000) × 100% = 33.64%
Current Ratio
Current Ratio: Current Ratio = Current Assets / Current Liabilities
Current Ratio = $638900 / $375900 = 1.70:1
Acid Test Ratio
Acid Test Ratio: Acid Test Ratio = (Current Assets - Inventories) / Current Liabilities
Acid Test Ratio = 1.08:1
Analysis
Spire Limited's acid test ratio for the year 2014 is less than the industry average of 1.4:1, indicating weaker liquidity position compared to the industry. While the gross profit margin of 47.45% is good, the company needs to improve its liquidity position. The current ratio of 1.70:1 suggests that Spire Limited can meet its short-term obligations.
In conclusion, the company's performance in terms of profitability is decent with a good gross profit margin, but its liquidity position needs attention to align with industry standards.