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Word Count: 1,479
All company accounts are prepared in accordance with the various accounting laws and regulations and are designed for a wide audience Therefore to obtain data for specific purposes it is frequently necessary to submit the numbers to specific analysis Following is an analysis of The PG Corporations year 2004 and 2005 financial statements This analysis is intended to through the calculation of ratios assess the short-term and long-term liquidity in addition to the profitability of The PG Corporation Short-term liquidity is the ability of the company to meet its short-term financial commitments Short-term liquidity ratios measure the relationship between current liabilities and current assets This helps us measure the PGs ability to sell inventory to collect receivables and to pay current liabilities Following is the Current Ratio the return on sales ratio earnings per share EPS debt ratio and the price earnings ratio These measures are concentrated upon the current assets and current liabilities to asses the PG Corporations ability to meet their financial commitments as they become due Current Ratio Current Ratio Current Assets 2032900 081189 Current Liabilities 2503900 For the 2005 financial year PG Corporation had 2032900 in total current assets and 2503900 in total current liabilities This gives the company 081 for ever dollar of current liabilities This could be seen as a secure situation but by looking into the 2004 financial year Statement of Financial Position it can be ascertained that the company had 030 for ever dollar of current liabilities That is 1711500 in total current assets and 5704800 in total current liabilities This shows that PG Corporation increased its ability to pay debts The PG Corporation 2005 Free Cash Flow Free cash flow is defined as operating cash flow less capital spending The company views free cash flow as an important measure because it is one factor in determining the amount of cash available for dividends and discretionary investment Free cash
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