(A) Solvency . To Determine Microline’S Solvency, The Ability

Based on the above income statement data (assume interest income is zero), the company's interest coverage ratio is

However implementation of liquidity ratios illustrates that the ‘short-term debt-paying ability’ of the companies has improved with and without the inclusion of inventories (Jerry J et al, 2008, pg214). This is of particular interest to M&S who may require financial aid to finance the renovation of its stores. In terms of the current recession many investors may be worried to what effect the current recession will have on Tesco and M&S respectively.

The decline of inventory turnover presents the incresed possibility of inventory obsolescence which is likely to be assessed as higher business risk. In debts to equity part, the ratio in current year is much higher than that of preceeding year, which means the extent of use of debt in financing company is much higher than before. Pinnacle has used most of its borrowing capacity and has little cushion for addional debt.This action brought high business risk to Pinnacle. In addition, Pinnacle puchase more inventory in current year that that of preceeding year, and net sales are increasing also compared previous year. However, the net income is decreased significantly. These changes show expenses (maybe direct or indirect) have increased dramaticly. The company uses more expensive materials and labors to manufacure and sell products.

Increase in current liabilities Substantial increase in current liabilities weakened the company’s liquidity position. Its current liabilities were US$2,063.94 million at the end of FY2010, a 48.09% increase compared to the previous year. However, its current assets recorded a marginal increase of 25.07% - from US$1,770.02 million at the end of FY2009 to US$2,213.72 million at the end of FY2010. Following this, the company’s current ratio declined from 1.27 at the end of the FY2009 to 1.07 at the end of FY2010. A lower current ratio indicates that the company is in a weak financial position, and it may find it difficult to meet its day-to-day obligations.

|. Its net profit margins, ROE, and amount of cash on hand to make interest payments

The long term solvency of Microline in is question as the company recently issued a long term note and reclassified a short term note to long term which accounted for $7000. The direct result of this shows an increase in the total debt from 47% in

 1. Assess the current financial health and recent financial performance of the company. What strengths and/or weaknesses would you highlight to Adeline Koh? From the ratio of profitability, the company had about 18% on operating margin, 16% on ROE, 8% on ROS and 5% on ROA in both 1998 and 1999. However, there was a downturn trend in profitability ratio in 2000. This could be the result of price competition because of the introduction of DVD manufacturing in the market. The profitability ratios rose again in 2001. It shows that the company had ability to recover its ROE and operating margin. If ROA is sound and debt levels are reasonable, a strong ROE is a solid signal that managers are

Debt-to Asset Ratio indicates that 48% of AMT's assets money comes from creditors (1985). In addition, the low current ration implies lack of liquidity (1.78 for 1986). Therefore, the company needs to rely heavily on outside financing to meet maturing obligations since there is no operating income.

The company lost money almost every year since its leveraged buyout by Coniston Partners in 1989. The income generated was not sufficient to service the interest expenses of the company which stood at $2.62B in 1996. From Exhibit 1, we can say that interest coverage ratio computed as EBIT / Interest Expense was 1.31 in 1989 and has been decreasing over years and currently stands at 0.59. This raises a question of how the company can meet its interest payments without raising cash or selling assets.

| For every $1 in assets, the company generates 10.8 cents net income-in accounting terms, which gives us a return of 10.8% and is considered highly effective in such business

We assume linear increase in the EBIT and EBITDA at 3% for 1999 from 1998 figures. Considering the debt will be long-term, we test both 10- and 20-year corporate yields as interest rates to see what would be the coverage ratios, using the 1999 projected figures.

During this period, the Return on Assets increased from 5.7% in 2012 to 34.6% in 2013. This implies the number of cents earned on each dollar of assets increased from 2012 to 2013. This shows that the business has become more profitable. Equally, the Return on Equity also increased from 12.0% in 2012 to 46.5% in 2013. This similarly implies that the company in 2013 was more efficient in generating income from new investment. This, also can be attributed to the sale of the Digital Business Brand which enabled the company appraise its strategic plan.

Every company for example Wal-Mart worries about its profitability. One of the most regularly utilized implements of financial ratio analysis is profitability ratios which are utilized to figure out the bottom line of the company. Profitability measures are vital to corporation managers and owners alike. If a small industry has outside stockholders who have put their own money into the corporation, the primary owner surely has to show profitability to those equity stockholders. (Blanchard, 2008)

The next set of ratios evaluate solvency, which is the company’s ability to meet its long-term obligations. The first ratio, times interest earned, represents a margin of protections for creditors. Gap Inc. generated $35.23 in income for each $1 of interest expense, which increased quite substantially from 2011 and 2012. The next ratio to evaluate for Gap Inc. is the debt-to-equity ratio, which decreased from 1.69 in 2011 to 1.56 in 2013. This tells us that Gap Inc. has $1.69 in liabilities for every $1 in stockholders’ equity.

The coverage ratios use cash flow from operations in most cases. Coverage ratios are important to long term investors and creditors because of the nature of the ratios that show the availability of cash to pay for items that include long term debts and dividends as well calculating percentages of cash flow from operations to shareholders equity, and average number of common shares outstanding (Ibarra, 2009). In addition, it has been determined that the cash flow to total debt (a coverage ratio) can be used as one of the best indicators of financial distress (Jooste, 2007). In all coverage ratios, a high ratio and increasing trends is the best case scenario.