Extending more generous credit terms to customers

Aligning sales growth with available working capital and capacity

Reducing equity financing

Maintaining a high dividend payout

High levels of cash and receivables

Excessive reliance on inventory for liquidity

Strong working capital efficiency

Poor credit control over receivables

Using retained earnings to pay down long-term debt

Declaring a large special dividend

Issuing more corporate bonds

Replacing equity with preference shares

By reclassifying long-term debt as equity

By temporarily delaying payments or accelerating receipts at period-end

By inflating profitability in the income statement

By excluding short-term liabilities from the balance sheet

Acquiring new equipment using retained earnings

Decreasing cost of goods sold

Writing off old receivables

Increasing sales while keeping asset base constant

Increasing sales with declining cash flow from operations

Increasing net assets and decreasing gearing

Increasing gross profit margin and stable inventory days

Declining receivables days and rising liquidity

A significant increase in shareholders’ equity

Improved asset turnover

Increased tax expense

Reduced dividend payout

Ratios automatically reflect inflation-adjusted values

Ratios consider both quantitative and qualitative data

Ratios are rarely used by external stakeholders

Ratios are affected by differences in accounting policies between companies

It indicates how effectively a company generates operating profit from all long-term capital

It measures the return to shareholders based on net income and equity

It assesses the efficiency of capital investment by comparing profit to total equity

It measures the proportion of profit retained in the business

The cost structure has become less efficient, reducing profitability

The company reduced its production costs through economies of scale

The company improved gross margin efficiency

The company’s inventory turnover has increased