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Research Methodology WC

The document outlines the research methodology used to analyze the financial status and credit worthiness of a company. Primary data was collected through observations and interviews with the finance manager, while secondary data came from financial documents like the balance sheet, profit and loss account, and journals. Tools for analysis included a schedule of changes in working capital and ratio analysis. Key ratios examined were the current ratio, which measures short-term liquidity, and the absolute liquidity ratio, which focuses on liquidity in terms of cash and near-cash items.

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Vishnu Kanth
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1K views4 pages

Research Methodology WC

The document outlines the research methodology used to analyze the financial status and credit worthiness of a company. Primary data was collected through observations and interviews with the finance manager, while secondary data came from financial documents like the balance sheet, profit and loss account, and journals. Tools for analysis included a schedule of changes in working capital and ratio analysis. Key ratios examined were the current ratio, which measures short-term liquidity, and the absolute liquidity ratio, which focuses on liquidity in terms of cash and near-cash items.

Uploaded by

Vishnu Kanth
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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RESEARCH METHODOLOGY

Research design

In view of the objects of the study listed above an analytical research design has been adopted. Analytical research is one which is largely interprets and already available information and it lays particular emphasis on analysis and interpretation of the existing and available information.

To know the financial status of the company.

To know the credit worthiness of the company.

To offer suggestions based on research findings.

Data collection method


Primary data

Informations are collected through observations, and from finance manager.

Secondary data

Data are collected through company balance sheet, profit and loss account, magazines and journals.

TOOLS USED FOR ANALYSIS:


1. Schedule of changes in working capital 2. Ratio analysis

SCHEDULE OF CHANGES IN THE WORKING CAPITAL:

The statement of changes in working capital is concerned with the current assets and current liabilities alone as they are shown in the balance sheet of the current year and the previous year The working capital statement shows increase or decrease in the working capital as the final result.

Ratio analysis

The ratio analysis is one of the most powerful tools of financial analysis. mathematical relationship between two or more items from the financial statements.

ratio is

Ratio analysis is the process of computing, determining and presenting the relationship of items. One can draw conclusions about the exact financial positions of a concern with the help of ratio

Current ratio: The ratio is current asset to current liability is called current ratios. In order to measure the short term liquidity or solvency of a concern, comparison on current assets and current liabilities

is inevitable. Current ratio indicates the ability of a concern to meet its current obligations and when they are do for payment. The current ratio is one of the best known measures of financial liquidity. The formula for current ratio is:

Current assets

Current ratio=

------------------------------------

Current liabilities

Absolute liquidity ratio (or)cash position ratio:

This is also called cash position ratio or super quick ratio this is the variation of quick ratio This ratio measures liquidity in terms of cash and near cash items and short term current liabilities cash position ratio is calculated with the help of following formula.

Cash and bank balance + marketable securities

Absolute liquidity ratio= ----------------------------------------------------------------------

Current liabilities

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