Is Electricity Company Of Ghana A Viable Company? A Financial Analysis Of ECG (2009-2012)

As Ghana struggles to end the power crises, al ot of questions have been asked about the performance of ECG, the main distributor of power. This questions became intense when the management of ECG voted in 2013 to increase their salaries by 35%. In this study, ACEP uses financial ratios to analyse the performance of ECG from 2009 to 2012

Current Ratio Conventionally the Current ratio is used to test a company’s current or working capital position. In conceptual terms it is also used to ascertain a company’s ability to readily use its current assets or short term assets (e.g. cash, cash equivalents, inventories, receivables and marketable securities if listed) to pay for its current or short term liabilities ( e.g. borrowings within one year, accounts payables and accrued taxes and expenses). In theory, the higher the current ratio, the better. However, the current ratio is supposed to be analysed in tandem with other more conservative liquidity ratios such as the Quick , Cash and Cash Conversion Cycle ratios so as to get the nearest accurate picture of the liquidity position of a said company. The Electricity Company of Ghana in the period under review (2009-2012) has recorded current ratios of 1.7, 1.5, 0.9 and 0.8 respectively. Clearly the trend shows a decline of current ratios of the company over the period under review and possibly poses danger to its liquidity position especially in the years 2011 and 2012 which have their values of currents assets not covering up for current liabilities.

The Africa Centre for Energy Policy (ACEP) was established in 2010 to contribute to development of alternative and innovative policy interventions through high-quality research, analysis and advocacy in the energy and extractives sector in Africa.

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