Business Responce Essay

916 WordsMar 25, 20094 Pages
DLS Enterprises PTY LTD is a small medium enterprise providing a broad range of educational services and products. DLS Enterprises has experienced significant cost pressures and increased competition and in some areas are not aware of the importance liquidity, solvency, profitability and efficiency have on the business. Liquidity for a small medium enterprise can be one of the most important areas the business keeps a close eye on. Liquidity is the ability for the business to meet its financial commitments in the short term; this is having adequate sources of funds to pay their current debt and expected expenses. Solvency is also very important; solvency indicates the businesses ability to meet its financial commitments in the longer term. Solvency is very important to shareholders and owners as it shows a clear indication of the risk to their investment. Profitability is the most important in the eyes of shareholders. Profitability shows the earning performance of a business and shows its capacity to use recourses to maximise profits. Finally efficiency, efficiency is the ability of a business to use its recourses effectively ensures financial stability in the long -term and profitability. Liquidity is a very important matter for DLS enterprises because they are experiencing greater competition, this means they can’t have lazy money lying around or they can’t be behind in short term commitments. The current ratio shows the businesses short term liquidity showing current assets over current liabilities. At DLS enterprises there are $550 000 of current assets to $110 000 to current liabilities. The current ratio at DLS enterprises is 5:1 meaning there is $5 of current assets to cover $1 of current liabilities. This is very safe ratio compared to the industry average at 2:1. Although the current ratio has proven to be a lot safer at DLS enterprises compared to the

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