China Southern Financial Performance Analysis
Financial Performance Analysis
Liquidity Ratios They measure the ability of a company to meet its current debts. They show if a company has sufficient cash to carry on its business for the next few months.
| |Industrial Average |2011 |2010 |2009 |2008 |2007 |
|Current Ratio |1.15 |0.44 |0.49 |0.25 |0.22 |0.21 |
|Quick Ratio |1.06 |0.40 |0.45 |0.22 |0.19 |0.18 |
Table1. Liquidity Ratios The current and quick ratios of the industrial average are both over 1. They indicate that the entire airline service industry is possessing more than $1 of current asset to meet $1 of its short-term debt. These high current and quick ratios were attractive to creditors but the investors would consider these ratios as less productiveness and less effectiveness. By comparing the current and quick ratios of the company and the industrial average, the company had both ratios lower than the industrial average’s, which were more attractive to investors. The current ratio shows that the company has $0.44 of current asset for every $1 of current liabilities, so there is only $0.44 for every dollar of current debt. This low current ratio indicates less liquidity, implying a greater reliance on operating cash flow and outside financing to meet short-term obligation. An increasing trend of the current ratio means the company has been increasing its amount of current assets over current liabilities. It is good for the creditors since a higher ratio indicates a better ability to meet current debt. The quick ratio is more conservative than the current ratio since it includes only the more liquid current assets, excluding the inventory and the prepaid expense because they cannot be easily converted back into cash. The
Liquidity Ratios They measure the ability of a company to meet its current debts. They show if a company has sufficient cash to carry on its business for the next few months.
| |Industrial Average |2011 |2010 |2009 |2008 |2007 |
|Current Ratio |1.15 |0.44 |0.49 |0.25 |0.22 |0.21 |
|Quick Ratio |1.06 |0.40 |0.45 |0.22 |0.19 |0.18 |
Table1. Liquidity Ratios The current and quick ratios of the industrial average are both over 1. They indicate that the entire airline service industry is possessing more than $1 of current asset to meet $1 of its short-term debt. These high current and quick ratios were attractive to creditors but the investors would consider these ratios as less productiveness and less effectiveness. By comparing the current and quick ratios of the company and the industrial average, the company had both ratios lower than the industrial average’s, which were more attractive to investors. The current ratio shows that the company has $0.44 of current asset for every $1 of current liabilities, so there is only $0.44 for every dollar of current debt. This low current ratio indicates less liquidity, implying a greater reliance on operating cash flow and outside financing to meet short-term obligation. An increasing trend of the current ratio means the company has been increasing its amount of current assets over current liabilities. It is good for the creditors since a higher ratio indicates a better ability to meet current debt. The quick ratio is more conservative than the current ratio since it includes only the more liquid current assets, excluding the inventory and the prepaid expense because they cannot be easily converted back into cash. The