Financial Ratio Analysis And Comparison Between Contemporary Clothing And Modern Fashion Essay.

On considering the financial health of Contemporary Clothing and Modern Fashion a recommendation can be provided concerning the acquisition of the two companies based on the financial ratio. Modern Fashion is most suitable for acquisition as gauging into the profitability ratio it is noticed that the gross profit ratio and the net profit ratio reported by Modern Fashion stood 22.35 and 2.43 respectively. While the contemporary clothing reported a lower gross profit ratio and net profit ratio of 19.58 and 1.31 respectively.

Considering the efficiency of Modern Fashion, the asset turnover ratio and accounts receivable ratio represented 1.86 and 6.12 respectively however the Contemporary Clothing reported a higher ratio of 1.94 and 10.54. Considering the liquidity position of Modern Fashion reported a current ratio of 1.09 and cash ratio of 0.075 while the Contemporary Clothing reported a current ratio of 0.92 and 0.21. An assertion can be bought forward by stating the it is better to acquire Modern Fashion since the company has reported a higher profitability ratio and liquidity ratio than Contemporary clothing.

On the event of the reliability of the above stated advise it can be stated that profitability aspects and the liquidity aspects of an organization makes the organization better placed in meeting its short term and long debt. Hence, as evident from the ratio analysis that is performed an assertion can be bought forward by stating that acquiring Modern Fashion would be a profitable venture since the company is better placed to meet its short term and long term debt. The profitability and liquidity position of Modern Fashion makes the company more attractive venture than Contemporary Clothing.

Investment decision can be defined as the decisions that are taken by the investors to conduce investment analysis by using the fundamental analysis and technical analysis. Investment decisions are generally supported by the decision tools (Drury, 2013). Financing decision is related to the decision relating to the liabilities and stockholders’ equity of an organization balance sheet such as decision of issuing bond. Financial managers are accountable for the financial health of the organization. They are responsible for producing reports, creation of strategies and undertakes the decision for long term financial goals of the organization.

Financial managers are responsible for helping the managers to make the financial decisions. Investment decision of the managers are associated with the careful selection of the assets in which the funds are invested by the firms (Cost, 2016). An organization has several options to invest their funds however it is the mangers of the firms that chooses the most appropriate investment that would introduce maximum benefit for the organization by deciding and selecting the most correct proposal in investment decision.

Efficiency Ratios

Freida is more suited to the work of since experience of her education would help in guiding financial decision by creating, monitoring and enforcing the policies and process. Her duties as controller would be helpful in establishing, monitoring and enforcing internal controls (Schuster, 2015). Fritz on the other hand would be more suitable for the duties of treasurer since the education of Fritz in the areas of finance would be helpful in to safeguard the organization finances by working closely with the organization finances. Working as the treasurer Fritz would be better able to understand the aspects of financial reporting, bookkeeping and record maintenance.   

Difference between Commercial Bank, Investment Bank and Insurance Bank

The key differences between Mutual Fund, Hedge Fund and Pension Fund are as follows;

The key differences between primary market and secondary market is stated below;

1. The securities that is issued previously in the marketplace are regarded as the primary market and the same is later registered on the recognized stock exchange for the purpose of purchase and sale is known as the secondary market (Velasquez et al., 2015).
2. The charges of the shares in the principal marketplace is fixed, on the other hand the costs of the shares in the secondary market might differ in respect of the demand and supply of the shares that is being bought and sold.
3. Primary market offers funding to the new businesses as well as to old businesses for the purpose of growth and development. On the other hand, the secondary market do not provides funding to the businesses since they are not engaged in the purchase or sale transaction.

Difference between capital market and money is stated below;

1. Money market can be defined as the place where the marketable securities of short term are traded. On the other hand, a market where long term securities are created and traded is referred as the capital market (Lanen, 2016).
2. The instructed that are traded in the money market carries lower amount of risk, therefore they are safe for investment, whereas securities that are traded in the capital market carries higher risk.
3. Under the money market, the amount of liquidity is high however; under the capital market the amount of liquidity is relatively lower (Alawattage et al., 2017).

The major differences between the stock market and the fixed income market is method through which they generate profits for the investors along with the method through which they are traded with the level of risk carried by them (Lopez et al., 2015). Stock markets comprises of the purchase and sale of stocks performed on constant basis exchanges. All the Stock markets irrespective of their type can be volatile, goes through significant amount of highs, and lows in respect of the values of shares.

Fixed income market on the other hand are more commonly referred as the bonds market or comprises of the bonds that are issued by the federal government. Fixed income market generally carries lower amount of risk than the equity investments however, the fixed income market offers lower amount of risk than equity investments (Kokubu & Kitada 2015). Success under the stock market with equity investments comprises of the greater amount of research and requires constant follow-up of investments. However, under the fixed income market it does not require high amount of research since they carry lower degree of risk.   

Break-even point can be defined as the level of sales where there is neither any profit nor any loss (Schaltegger & Zvezdov, 2015). The amount of revenue is the same as the total costs.

The importance of breakeven analysis are as follows;

1. This process helps the business in ascertaining the true cost of executing business and their prices.
2. The business owners are able to know the total amount of contribution each product and services generates on the overall profitability of the company.

Reference List:

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Lanen, W. (2016). Fundamentals of cost accounting. McGraw-Hill Higher Education.

Lopez-Valeiras, E., Gomez-Conde, J., & Naranjo-Gil, D. (2015). Sustainable innovation, management accounting and control systems, and international performance. Sustainability, 7(3), 3479-3492.

Prasad, A. D. (2014). Must Make Cost & Management Accounting Key to Building National Competitiveness. The MA Journal, 49(8), 9-10.

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Schuster, P. (2015). Cost and Management Accounting. In Transfer Prices and Management Accounting (pp. 1-4). Springer International Publishing.

Velasquez, S., Suomala, P., & Järvenpää, M. (2015). Cost consciousness: conceptual development from a management accounting perspective. Qualitative Research in Accounting & Management, 12(1), 55-86.