Over the three year period from 2011 to 2013 the current ratio has been below the industry average which means it has been less liquid than the industry average. The company is still able to pay its current debts, but the fact that it is lower than the standard may mean that they are borrowing too much, or are not effectively managing their resources. However, it may also mean that they have been borrowing to finance growth, which means that a lower current ratio is not necessarily bad for the company.
When we look at the quick ratio analysis, we see that the company has seen some growth, but again is worse off than the industry standard. This calls into question whether or not the company will be able to pay off it’s short term debts.
The inventory ratio of 4.09 shows that the company is doing poorly compared to the industry average of 6.1 and has been for the last few years. This means that they are either inefficient in managing their inventory and should slow production, or they have slow sales. To improve performance they should be working on improving sales growth through research, marketing, or maybe even a different product.
The day sales outstanding refers to the length of time it takes to receive payment. 2013 sees a significant increase in the time it takes to receive payment. This can have an adverse affect for the company as the money that is owed to them could have been reinvested to create more capital. This is again below the industry average. When a company is not paid quickly, it increases the chances of the customer not paying at all. The should come up with some program to encourage quicker payment.
The fixed asset turnover ratio shows us how efficiently a company is using its fixed assets. I...
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...ook at the price/earnings ratio, we see that Investors are willing to pay a more to the company in 2013 per dollar of profits than in previous years, yet it still remains lower than what they are willing to invest elsewhere. The market/book value is greater than 1.0 every year which means investors are willing to pay more than the book value of a stock. Both the P/E and the M/B remain less than their industry standards and therefore fewer investors are likely to buy stocks.
Overall, The company has seen improvements from 2012 (which was a poor year financially for the company) to 2013. Yet on many of the financial ratio calculations remain lower than the industry standards. My suggestion for the company is that they need to figure out how to improve their overall profits. This might be through better management of assets, better debt leverage, or increase in sales.
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