financial analysis
SPARTECH Corporation 2009 2010 Industry Average
Current Ratio 1.6 times 1.5 times 2.26
Quick Ratio 0.88 times 0.85 times 0.87
Average collection period 51 days 48 days 13 days
Days inventory held 28 days 31 days 134 days
Days payable outstanding 47 days 52 days 37 days
Cash Conversion Cycle 32 days 27 days 133 days
Cash flow from operating activities 65,264 39,330
Current Ratio Trend: In both years, the company has the ability to use its resources to pay for its short term debt. However, the current ratio has decreased from 2009 to 2010. This means the company is becoming weaker.
Quick Ratio Trend: The quick ratio has decreased from 2009 to 2010. This means the company is becoming weaker and has less current assets (excluding inventory) in relation to its current liabilities. Therefore, its ability to pay short term creditors has not improved.
*Quick Ratio compared to current ratio: The company's current ratio is significantly higher compared to its quick ratio. It is a clear indication that the company's current assets are dependent on inventory.
Average Collection Period: Spartech Corporation average collection period ratio has decreased from 2009 to 2010. However, if the company "grants" its customers 60 days to pay purchases placed on credit, then both ratios of 51 days and 48 days are acceptable. If, on the other hand, the company allows its customers only 30 days to pay for purchases placed on credit, then the management of Spartech Corporation should attempt to reduce the average collection period ratio by screening customers more carefully or by implementing new collection strategies and policies.
Days inventory held: In both years the Spartech
Current Ratio 1.6 times 1.5 times 2.26
Quick Ratio 0.88 times 0.85 times 0.87
Average collection period 51 days 48 days 13 days
Days inventory held 28 days 31 days 134 days
Days payable outstanding 47 days 52 days 37 days
Cash Conversion Cycle 32 days 27 days 133 days
Cash flow from operating activities 65,264 39,330
Current Ratio Trend: In both years, the company has the ability to use its resources to pay for its short term debt. However, the current ratio has decreased from 2009 to 2010. This means the company is becoming weaker.
Quick Ratio Trend: The quick ratio has decreased from 2009 to 2010. This means the company is becoming weaker and has less current assets (excluding inventory) in relation to its current liabilities. Therefore, its ability to pay short term creditors has not improved.
*Quick Ratio compared to current ratio: The company's current ratio is significantly higher compared to its quick ratio. It is a clear indication that the company's current assets are dependent on inventory.
Average Collection Period: Spartech Corporation average collection period ratio has decreased from 2009 to 2010. However, if the company "grants" its customers 60 days to pay purchases placed on credit, then both ratios of 51 days and 48 days are acceptable. If, on the other hand, the company allows its customers only 30 days to pay for purchases placed on credit, then the management of Spartech Corporation should attempt to reduce the average collection period ratio by screening customers more carefully or by implementing new collection strategies and policies.
Days inventory held: In both years the Spartech