In examining the strengths and weaknesses of Happy Hamburger, Co. it is extremely valuable to consider the appropriate financial ratios available. The ratios used are: current ratio, days sales outstanding, inventory turnover, fixed asset turnover, total asset turnover, return on sales, return on assets, return on equity and debt ratio. Also to be examined will be the effect on ratios that Happy Hamburger will experience as a result of a double increase in: sales, inventories, accounts receivable and common equity. These increases will have an impact on the financial ratios being used in this analysis. Ratios Current Ratio. The current ratio can indicate a company’s liquidity and is considered one of the most valuable ratios in analyzing …show more content…
This ratio compares the net sales of an organization with regard to its fixed assets. It quantifies the company’s operating performance by indicating the ability the organization has to generate net sales from fixed assets such as: property, plant and equipment. The higher the ratio, the more capable an organization is at utilizing its fixed asset investments to generate sales. In comparison to the industry average of 12.1, Happy Hamburger falls short before the increases at 5.49, but comes a bit closer to the industry average after the increases and has a score of 10.99. With regard to industry average, this could be considered a weakness for Happy Hamburger. Total Asset Turnover. The total asset turnover ratio is calculated using the organizations sales with regard to its total assets. It is indicative of an organizations efficiency and its ability to generate sales by using its total assets. A higher number is a more appealing ratio, here as it tells us the company is “generating more revenue per dollar of assets (Investopedia.com, 2016)”. Again, Happy Hamburger falls below the industry average of 3, coming in at 1.69 before the increases and 2.11, after. These numbers are not terrible but don’t meet the industry average and would be considered a …show more content…
The debt ratio is calculated using short term and long term debt relative to the total assets of an organization. The higher this figure is, the riskier a financial investment the organization is. The industry average has a debt ratio of 55%, a more promising figure than Happy Hamburger had before its increases, 68%. The debt ratio would have been considered a weakness for Happy Hamburger, but with the increased figures taken into consideration, this figure is a strength for Happy Hamburger at 39%, a more favorable figure than the industry average and indicating the organization is a less risky
Stuff’ n Burger numbers shows that a proportionately large spending on A&P is still generating no operating income. It is in the red. This points out the difficulty and expense involved in developing new brand or products.
Home Depot and Lowe's are two home improvement chains in the United States. Home Depot is the leading company in this industry followed by Lowe's as the second largest. This paper uses financial ratios to compare these companies regarding operating profitability, asset utilization, and risk management in the years 2005 and 2006. The evaluation compares the performances of these stores against the industry.
This passage should encourage us to never give up. Financial Measures According to Chipotle Mexican Grill, Inc.’s financial ratios, “inventory turnover ratio rose to 202.33, below company average. However, the average processing period stayed unaffected at 2 days, in the Sep. 30, 2015 quarter.” Within the services sector, there was only one business that accomplished a greater inventory turnover ratio.
ROE = net profit margin X total asset turnover X total assets to equity ratio = -39.74% for FY 2016.
By dividing net sales by net fixed assets, an investor can see if the company is using its fixed assets efficiently. Since fixed assets are often high price items, it is important that a company is using the fixed assets well; the higher the ratio, the better. Since we are lacking information on what type of industry this is, it is hard to put to much significance on the ratio. Since the ratio is similar, even a little higher, than the competitor, it could be safe to say that this is normal for the
Panera Bread had a 0.86 quick ratio for the year ending December 2014 which was an increase over their 2013 fiscal year ratio of 0.69. This indicates that the company has $0.86 of liquid assets accessible to account for every $1 of current liabilities. This annual escalation was generated by a greater increase in Panera Bread’s assets over the year compared to its liabilities. The industry average for this sector is a quick ratio of 0.80. These figures illustrate that Panera Bread is executing superior to the rest of the industry. Panera Bread has firm financial power to reimburse its debts if
Each competitor 's current ratio, quick ratio, and cash ratio are able to be found in this exhibit for the year ended in 2015. McDonald’s currently has a cash ratio of 0.76, a quick ratio of 1.20, and a 1.52. Starbucks has a cash ratio of 0.44, a quick ratio of 0.64, and a current ratio of 1.19. Finally, the Dunkin Brand Group Inc. has a cash ratio of 0.59, a quick ratio of 0.74, and a current ratio of 1.25. When looking at these ratios one is able to find that compared to its competitors, Starbucks is less liquid than McDonald 's and Dunkin Brand Group
...To check how successful it has been, we calculate debtor collection period ratio. (Dyson, 2004) Fixed Asset turnover: In this ratio, we seek the amount of sales that can be generated (or the amount of fixed assets necessary to achieve a level of sales) from a given level of fixed assets. (Klein, 1998) Total asset turnover: This ratio determines that how efficiently a firm is utilizing its assets. If the asset turnover ratio is high, the firm is using its assets effectively in generating sales. If this ratio is low, the firm may not be using its assets efficiently and shall either increase sales or eliminate some of the existing assets. (Argenti, 2002) Solvency Ratio Gearing: Gearing reflects the relationship between a company’s equity capital (ordinary shares and reserves) and its other form of long-term funding (preference share, debenture, etc.) (Black, 2000)
High current ratio is a clear indication that company is able to meet its current liabilities and manages very well its liquidity position. However, quick ratio will provide a better view.
This bar graph is showing that the trend is sporadic from year to year. This ratio shows the company’s total sales that are available for financing and supporting the company’s ongoing operations. Large ratios are needed to show that the company is in a better place to develop than its rivals. Kraft Food Group has room to grow in this
This ratio establishes the relationship between the cost of goods sold during a given period and the average amount of stock carried during the given period. This ratio indicates the efficiency of the firm’s inventory management. A low inventory turnover ratio is an indicator of dull business. Generally speaking, a high stock turnover ratio is considered better as it indicates that more sales are being produced by each rupee of investment in stock but a higher stock turnover ratio may not always be an indicator of favorable results. It may be the results of a very low level of stock which results in frequent out of stock positions. Such a situation prevents the company from meeting customers’ demands and the company cannot earn maximum profits.
The Quick Ratio shows that the company’s cash and cash equivalents are the highest t...
Ratios traditionally measure the most important factors such as liquidity, solvency and profitability, as well as other measures of solvency. Different studies have found various ratios to be the most efficient indicators of solvency. Studies of ratio analysis began in the 1930’s, with several studies of the concluding that firms with the potential to file bankruptcy all exhibited different ratios than those companies that were financially sound. Among the study’s findings were that the deciding factor of the predictor of bankruptcy should not be only a few ratios, as the measure of a company’s financial solvency may differ as the firm’s situations differ. The important question is to which ratios are to be used and of those ratios chosen, which ratios are given priority weight.
At the start of 2015 McDonald’s stated they wanted to increase their net profit between 5% - 7% over 2016 calendar year. The Gross Profit ratio from 2014 - 15 did not fluctuate from 66%, following this was the small increase in net profit by 1%. McDonald 's had fallen far from their overall goal of a 5% -7% increase. Yum Brands is now achieving higher net margin at its company stores than McDonald’s with their revenue skyrocketing in from 41,546,000,000 in 2014 and 42,692,000,000 in 2015 well ahead of McDonald’s.
Any successful business owner or investor is constantly evaluating the performance of the companies they are involved with, comparing historical figures with its industry competitors, and even with successful businesses from other industries. To complete a thorough examination of any company's effectiveness, however, more needs to be looked at than the easily attainable numbers like sales, profits, and total assets. Luckily, there are many well-tested ratios out there that make the task a bit less daunting. Financial ratio analysis helps identify and quantify a company's strengths and weaknesses, evaluate its financial position, and shows potential risks. As with any other form of analysis, financial ratios aren't definitive and their results shouldn't be viewed as the only possibilities. However, when used in conjuncture with various other business evaluation processes, financial ratios are invaluable. By examining Ford Motor Company's financial ratios, along with a few other company factors, this report will give a clear picture of how the company is doing now and should do in the future.