ratios

575 Words2 Pages
bulb-icon

Recommended: assignment of principles of accounting

The team conducted an in-depth analysis of the Virtual Company” Berry’s Bug Blasters” Financial data obtained off their Intranet and this data was used to determine the ratios for liquidity, profitability and solvency. A comprehensive analysis is provided and we aim to share insight on the company’s financial performance, and posture, via memorandum to the Company’s Chief Executive Officer (CEO). To determine how Berry’s Bug Busters assets and debts have been managed to ensure profitability, both horizontal and vertical analysis was performed. A businesses ability to meet the payment demands of current liabilities by using current assets is known as Liquidity, Ratios of liquidity ratios should hold great importance to companies, their creditors, and employees. Using the most current as of date of 2008, Berry’s Bug Blasters has a debt to total assets ratio of 15.88 percent. A company’s practical ability to meet its long-term financial obligations is known as Solvency. Some Key ratios involving solvency are debt to assets ratio, the debt to capital ratio, and the debt to equity ratio....

Show More
Related

  • Bestcare Health Maintenance Organization Net Working Capital

    579 Words  | 2 Pages

    Net working capital represents organization’s operating liquidity. In order to compute the net working capital, total current assets are divided from total current liabilities. When there is sufficient excess of current assets over current liabilities, an organization might be considered sufficiently liquid. Another ratio that helps in assessing the operating liquidity of as company is a current ratio. The ratio is calculated by dividing the total current assets over total current liabilities. When the current ratio is high, the organization has enough of current assets to pay for the liabilities. Yet, another mean of calculating the organization’s debt-paying ability is the debt ratio. To calculate the ratio, total liabilities are divided by total assets. The computation gives information on what proportion of organization’s assets is financed by a debt, and what is the entity’s ability to pay for current and long term liabilities. Lower debt ratio is better, because the low liabilities require low debt payments. To be able to lend money, an organization’s current ratio has to fall above a certain level, also the debt ratio cannot rise above a certain threshold. Otherwise, the entity will not be able to lend money or will have to pay high penalties. The following steps can be undertaken by a company to keep the debt ratio within normal

    Read More

  • McDonald's & Wendy's Financial Statement Comparison

    1687 Words  | 4 Pages

    When comparing the debt-to-assets ratio of McDonalds and Wendys, you have to divide the firms total liabilities by their total assets. Essentially, the debt-to-assets ratio is the primary indicator of the firms debt management. As the ratio increases or decreases, it indicates the firms changing reliance on borrowed resources. The lower the ratio the more efficient the firm will be able to liquidate its assets if operations were discontinued, and debts needed to be collected. In 2005 Wendy's had $2,076,043 worth in total assets and $846,264 in total liabilities. When divided, Wendys has the lower ratio of the two competitors at 40%. This means that they would take losses of 40% if operations were shut down, and the cash received from valuable assets would still be sufficient to pay off the entire debt. It also means that 40% of Wendys assets are made through debt. McDonalds in 2005 had $12,545.3 (in millions) of total liabilities and $22,534.5 (in millions) of total assets. After doing the math, McDonalds ends up with a ratio of 56% which is higher than Wendys by sixteen percent. This means that there is more default on McDonalds liabilities, which can be a costly event from lenders perspective. McDonalds makes 56% of all its assets through debt. In reality, its not good to have a debt-to-assets ratio over 50%. Its also not good to have a debt-to-assets ratio that is too low because...

    Read More

  • Comprehensive Problem: Sun Microsystems

    1139 Words  | 3 Pages

    A complete analysis conducted on the financial statements and status of Sun Microsystems exposed key issues determined to be of great import to shareholders. After examining the research findings and analysis, it seems that Sun Microsystems finances have not maintained a steady incline. In fact, it had definitely experienced some highs and lows in its return on investment and stockholders’ equity over a four- year evaluation spanning the years 1998 through 2001. In an effort to decipher the problems within the company’s operations, data from the following reports and ratios offered considerable clues.

    Read More

  • Apple Receivable Ratio Essay

    1367 Words  | 3 Pages

    Overall, Horizontal analysis and financial ratios are essential factors that businesses use to monitor its liquidity. Therefore, in order to improve Apple’s ratios and profitability, the company needs to implement a strategy to increase the company’s liquidity. Business owners or managers should monitor current ratio and acid test ratio as these ratios help us to ensure the company has the proper liquid assets to pay current liabilities, to stay in operations and to expand the company. As we noted in our acid test ratio and current ratio for the company, we show a lower ratio for acid test ratio than the current ratio, which means that the company’s current assets rely on inventory. Therefore, the company needs to convert old inventory into

    Read More

  • John Hopkins Hospital Case Study

    1035 Words  | 3 Pages

    Since companies are often unable to sell their fixed assets within any reasonable amount of time they are carried on the balance sheet at cost regardless of their actual value. As a result, it is possible for companies to grossly inflate this number, leaving investors with questionable and hard-to-compare asset figures (Investopedia.com, 2003).

    Read More

  • Ratio Analysis Of Starbucks

    1252 Words  | 3 Pages

    In regards to the corporation’s balance sheet, it is necessary to place an importance on liquidity ratios to demonstrate the company’s ability to pay its short term obligations such as accounts payable and notes that have a duration of less than one year. These commonly used liquidity ratios include the current ratio, quick ratio, and cash ratio. All three ratios are used to measure the liquidity of a company or business. The current ratio is used to indicate a business’s ability to meet maturing obligations. The quick ratio is used to indicate the company’s ability to pay off debt. Finally the cash ratio is used to measure the amount of capital as well short term counterparts a business has over its current liabilities.

    Read More

  • Financial Analysis of Three Supermarket Chains

    966 Words  | 2 Pages

    ...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)

    Read More

  • Financial Analysis Of Two Qatari Companies

    1681 Words  | 4 Pages

    The horizontal analysis shows that IQ’s total current assets increased by 25% and its total current liabilities increased by 40% during 2005. This is largely explained by the increase in trade receivables, the increase in inventory, the increase in trades payable, and the increase in term loans (notes 5, 6, 12, and 13 of the 2005 financial statement). The higher increase in total current liabilities than in total current assets explains why the current and acid-test ratios decreased from 4.66 to 4.17 and from 4.02 to 3.5, respectively. However, IQ seems to remain highly liquid considering the values of the mentioned liquidity ratios.

    Read More

  • Financial Analysis of Verizon versus AT&T

    1338 Words  | 3 Pages

    You would not buy a home, car or other large purchases without researching what product offered you the most for your money. The same is true when investing in a company. Investors do avid research on multiple companies to find what company matches the investors' criteria. In this paper Team C will research both AT&T and Verizon's financial documents. Team C will compare selected ratios, cash flow and make recommendations how both companies can manage cash flow for the future.

    Read More

  • Financial Ratio Analysis: Financial Stability And Performance

    1288 Words  | 3 Pages

    Upon examining P&G’s financial ability to meet short-term obligations, it is apparent that not only have their current liabilities exceeded current assets over the last three years, but close to half of their current assets have been tied up in inventories and other illiquid assets. For example, assessing both the quick and current ratio respectively shows that less than 70% of the firm’s current assets could be converted immediately to pay current commitments, but a little more than 90% of the firm’s liabilities would ultimately be covered. Though, based on industry average similar findings occur; therefore, it must not be uncommon for industries similar to P&G to

    Read More

  • Financial Ratios, Discriminant Analysis and the Prediction of Corporate BankruptcyANKRUPTCY – ARTICLE SUMMARY

    872 Words  | 2 Pages

    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.

    Read More

  • Financial Ratio Analysis Report Of Ford Motor Company

    1668 Words  | 4 Pages

    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.

    Read More

  • Financial Analysis of Pepsi Co, Inc. and The Coca-Cola Companies

    1757 Words  | 4 Pages

    The purpose of this paper is to provide data and analysis of PepsiCo, Inc. and The Coca-Cola Companies financial statements so that a potential investor can make an educated decision about where to place their money. The paper shows a vertical analysis of each company’s consolidated balance sheet, a horizontal analysis of their consolidated statement of income ratios showing solvency, liquidity and profitability.

    Read More

  • Martin Manufacturing Company Historical Ratios

    598 Words  | 2 Pages

    The current ratio and quick ratios for the year 2003 are at 2.5 and 1.3, which are both higher than the industry average. The company has enough to cover short term bills and expenses. Both the current and quick ratios are showing an upward trend compared to 2001 and 2002. The current assets decreased by $ 20,264 to $ 1,531,181 and the current liabilities also decreased considerably by $255,402 to $616,000, a 29.3% decline, thus making the current ratio jump to a 2.5. The biggest decline was seen is accounts payable which decreased by $170,500 to $230,000, a decline of 42.6 %.

    Read More

  • Banking and Finance

    1013 Words  | 3 Pages

    I dealt with strategy and financial matters for our virtual enterprise, while my colleagues were working on marketing and manufacturing. During the four months of the exercise, I have experienced finance from various aspects: capital budgeting, through selecting favorable investments for upcoming quarters; debt management, by assessing the necessary amount and efficiency of loans; profitability analysis and dividend policy, which have been used to compile the company’s general performance index. Working in a multinational team, which included an American, a Norwegian and a Moldovan, strengthened my negotiation skills, as well as flexibility and cooperation. But above all, this experience intensified my passion for finance. Of course, a pleasant bonus was the fact that, in the end, our company’s financial performance was six times the performance of the second-best team.

    Read More

More about ratios

Open Document