ANALYS Assignment HW 2
Leno Corradi
Homework #2: ANALYS Assignment
Liquidity Ratios: Current Ratio Analysis: The current ratio is a comparison of the company’s current assets and current liabilities. Each year, the current ratio is greater than 1.5; therefore, the company is solvent. The current ratio is highest in 2013 at 5.7%. Quick Ratio Analysis: The quick asset ratio measures liquidity without considering inventory. Northern Manufacturing had a slower turnover rate in 2011 and significantly increased in 2013 to 3.1%.
Asset Management Ratios: Average Collection Period Ratio Analysis: ACP measures the amount of time it takes to collect on credit sales. Most credit businesses are done within 30 days. Northern Manufacturing’s ACP ranged from 72-117 days, which is extremely high. It is safe to assume that the company has a lot of outstanding account receivables. Inventory Turnover Ratio Analysis: This ratio gives an indication of the quality of inventory and how well it is managed. Management of inventory in 2013 was not as frequent as in 2011 (3.0). Fixed Asset Turnover Ratio Analysis: The fixed asset turnover ratio is a long-term measure of the company’s performance. For every dollar the company is generating, they generate $4 in sales. Total Asset Turnover Ratio Analysis: This ratio is more widely used than the fixed asset turnover ratio. The ratio has steadily decreased over the course of three years. Debt Management Ratios: Debt Ratio: Northern Manufacturing’s debt ratio is extremely high throughout all three years. Although it decreased by roughly 8% in 2013, this number is still very high and is not a good representation of the company. Debt-to-Equity Ratio: The debt to equity ratio for the company is high over all three years. This implies that the company is at risk. TIE Ratio: A high level of interest coverage implies safety; consistent turnover and interest is being earned. The ratio changes a little bit, but not too drastically. Cash Coverage: The ratio is
Homework #2: ANALYS Assignment
Liquidity Ratios: Current Ratio Analysis: The current ratio is a comparison of the company’s current assets and current liabilities. Each year, the current ratio is greater than 1.5; therefore, the company is solvent. The current ratio is highest in 2013 at 5.7%. Quick Ratio Analysis: The quick asset ratio measures liquidity without considering inventory. Northern Manufacturing had a slower turnover rate in 2011 and significantly increased in 2013 to 3.1%.
Asset Management Ratios: Average Collection Period Ratio Analysis: ACP measures the amount of time it takes to collect on credit sales. Most credit businesses are done within 30 days. Northern Manufacturing’s ACP ranged from 72-117 days, which is extremely high. It is safe to assume that the company has a lot of outstanding account receivables. Inventory Turnover Ratio Analysis: This ratio gives an indication of the quality of inventory and how well it is managed. Management of inventory in 2013 was not as frequent as in 2011 (3.0). Fixed Asset Turnover Ratio Analysis: The fixed asset turnover ratio is a long-term measure of the company’s performance. For every dollar the company is generating, they generate $4 in sales. Total Asset Turnover Ratio Analysis: This ratio is more widely used than the fixed asset turnover ratio. The ratio has steadily decreased over the course of three years. Debt Management Ratios: Debt Ratio: Northern Manufacturing’s debt ratio is extremely high throughout all three years. Although it decreased by roughly 8% in 2013, this number is still very high and is not a good representation of the company. Debt-to-Equity Ratio: The debt to equity ratio for the company is high over all three years. This implies that the company is at risk. TIE Ratio: A high level of interest coverage implies safety; consistent turnover and interest is being earned. The ratio changes a little bit, but not too drastically. Cash Coverage: The ratio is