Executive summary After carrying out a ratio analysis for the company, it can be concluded that the company is performing poorly as compared to the competitor. The company’s profitability, liquidity, efficiency and solvency ratios are on the decline and are far beyond the competitor. The performance trend if the company is declining. However, the company’s financial stability is stable based on the current ratio but unstable using the quickest asset to generate revenue to offset current financial obligations. The firm is not as well utilizing the company’s assets well as trade receivables and inventory periods are too high as compared to the competitor. The company ought to improve profitability through a cost reduction mechanism as well as invest in a project that reduces costs. They should also investigate the company’s expenses. Introduction Babushka plc limited is a company that is involved in the manufacture and distribution of Jewellery and fashion accessories since 1975. What follows is a financial statement analysis of the company. This report on financial ratio analysis is aimed at measuring the general performance of the company. And this report can be used by shareholders, potential investors, the government, customers, employees and environmentalists. The ratios would help them get an in-depth understanding of the company’s profitability, liquidity, long–term solvency, financial stability and efficiency with which it is utilizing its assets to generate sales revenue. For the management, their objective would be on how to improve on poor areas and maintain good performance. Its intended users are the management of the company, customers, employees and the government, who would use it for taxation purposes. The sources of the data used have been the published financial statements, i.e. the Profit and loss accounts and the balance sheets of the years 2007 and 2008 that has been provided for this assignment. Users of financial statement There are many users of financial statements, and they include creditors, suppliers, customers, investors, government and the local community. Investors are interested in the firms’ ability to generate cash flow operations, make profits, and how the company is valued, they are also interested in the way the company pays dividends and the long-term sustainability of the company. They are interested in the firms’ liquidity and ability to finance its growth from internally generated funds. Their main interest is the dividends paid, the dividend declared, liquidity position, investing activities, and the performance of the share in the market. Creditors, customers and employees are interested in ratios such as activity ratio, liquidity ratios, profitability ratio, and long-term debt and solvency of the company. Activity ratios measure the ability of the firm to generate revenue; it also measures the ability of the management to raise revenue. Liquidity ratios measure the ability of the firm to raise cash resources to meet obligations and pay salaries. Profitability ratios measure the ability of the firm to use resources to generate profit. They also need long-term and solvency ratios to understand the capital structure of the company and be able to analyz