In this project, you will assess the financial health of the business in question, using financial analysis tools in your textbook. Please make your work neat and show all computations. For some of your computations, you will be comparing your results with averages of businesses within your business’s industry. For assistance in obtaining industry averages, see the Reference Desk at the library. Attach the sheet(s) obtained which show industry averages to this paper. In some cases, the industry averages sheet may not have the specific ratio, but you may be able to compute the ratio using the information on the industry average sheet. If no industry average is given, but you are able to compute the industry average, please do so. …show more content…
| From the balance sheet, compute the current ratio for all years presented. 2011: $2,046,558/$1,173,775=1.7 2010: $2,005,217/$1,298,845=1.5 | What is the industry average for the current ratio? .6 | Is your company’s current ratio weak or strong? Briefly explain your opinion. My company’s current ratio is very strong compared to the industry average. It is very strong in 2010 but it is even stronger in 2011. This shows that Hershey company is able to pay short-term obligations quickly. |
The Debt to Total Assets Ratio is defined on page 60. Please give a brief definition of the debt to total assets ratio here.Debt to Total Assets Ratio is total liabilities divided by total assets. It measures the percentage of total financing provided by creditors rather than stockholders. | From the balance sheet, compute the debt to total assets ratio for all years presented. 2011: $4,412,199/$3,539,551=1.2 2010: $4,272,732/$3,335,131=1.3 | What is the industry average for this ratio? .82 | Is your company’s current ratio weak or strong? Briefly explain your opinion. My company’s current ratio is weak. The percentage has decreased from 2010 to 2011 which is good because that means that liabilities have decreased compared to assets but the ratio is still well about that of the industry average. Meaning that the Hershey Company has more liabilities compare to assets than
A. Current Ratio: The ability for a company to pay short term obligations is measured by this ratio. In 2011 Company G moved from 1.86 to 1.77. Compared to the 1.9 Home Center Retail Benchmarks industry ratio, the numbers are below standards. Current Ratio represents values above 2 quartile industry benchmarks data (1.4 to 2.1). Current Ratio represents a weakness for Company G.
The current ratio shows the short-term debt-paying ability of the company also known as liquidity ratio. Components of the current ratio are current assets and current liabilities. To find the current ratio, divide current assets by current liabilities. For example if a current ratio was 2:1, then that company would be able to pay off its short term debt easily. But you should also look at the types of debt the company has because some assets might be larger. For the current ratio a rule of thumb is the ratio should be around 2:1. The company wants to at least make sure that the value of the current assets covers at least the amount of the short-term obligations. In 2013 the current ratio is 1.75 and in 2014 the current ratio is 1.8. This is showing a favorable
When comparing the debt-to-assets ratio of McDonalds and Wendys, you have to divide the firms total liabilities by their total assets. Essentially, the debt-to-assets ratio is the primary indicator of the firms debt management. As the ratio increases or decreases, it indicates the firms changing reliance on borrowed resources. The lower the ratio the more efficient the firm will be able to
Market value proportions of: Debt = $1,147,200 / $4,897,200 = 23.4% Pref. Share = $1,250,000 / $4,897,200 = 25.5% Common equity = $2,500,000 / $4,897,200 = 51.1%
The Debt-Equity Ratio shows that most of the capital was in terms of ordinary shares and is becoming more reliant on Shareholders Equity than on debt to finance operations.
As the creditors’ view, they prefer the high current ratio. The current ratio provides the best single indicator of the extent, which assets that are expected to be converted to cash fairly quickly cover the claims of short-term creditors. However, consider the current ratio from the perspective of a shareholder. A high current ratio could mean that the company has a lot of money tied up in nonproductive assets.
Before beginning an analysis of a company it is necessary to have a complete set of financial statements, preferably for the pas few years so that historical trends can be obtained. Ratios are a way for anyone to get an idea of the financial performance of a company by using the information contained in the financial statements. Ratios are grouped into four basic categories, liquidity, activity, profitability, and financial leverage. This document will use a variety of these ratios to analyze the firm, Sample Company, as of December 31,2000.
The current ratio directly relates the company’s current assets against its current liabilities. A good current ratio will be over 1. For example if the current ratio were 2.0 this would mean that the company’s current assets are twice as large as its current liabilities. For Tesla Motors the current ratio drops significantly over the years. It starts at 2.76 in 2010, then drops to 1.95 in 2011, and finally reaches 0.97 in 2012. As you can see the current ratio in 2012 is below one. The current ratio of 0.97 means that as of December 2012, Tesla Motors has more current liabilities than current assets.
This paper examines financial ratio analysis by defining, the three groups of stakeholders that use financial ratios, the five different kinds of ratios used and their applications, the analytical tools used in analysis, and finally financial ratio analysis limitations and benefits.
The second ratio to evaluate is Debt-To-Total Assets Ratio, which is calculated as total debt divided by total assets. Halliburton’s debt-to-total assets of .43 has improved from the 2009 ratio of .47 and the 2008 ratio of .46 given it a stronger position in the industry. The low level shows very manageable debt allowing Halliburton to take advantage of the rising demand for oil and
Computed: PPE = $6876M / $21,695M = 31.7% Intangible assets = $4041M / $21,695M = 22% Computed: $3,374M / $4,841 = 70% Computed: Accounts payable = $4461M / $13,021M = 34.2% Long-term debt = $2651M / $13,021M = 20.4% Computed: Long-term investments = $8214M / $22,417M = 36.6% Current assets = $7171M / $22,417M = 32%
.5189 for FY 2015, they show that almost half of the remaining assets are acquired by the shareholders. This is similarly projected by the equity ratio. Meanwhile, the debt-to-equity ratio foretells that there is a proportion of 143% total liabilities (for FY 2015) against the shareholder’s equity. The ratio seems high, yet it only shows the value allocation of the total liabilities against the total equity. On the other hand, for FY 2014, the total liabilities and total equity
Please see table A & B in the supplementary section for a complete chart of all financial ratios and calculations:
1. Current ratio, as table 3 shown, is increasing. It can be assumed that the company overall ability to meet its financial obligations has improved (Lee, 1998).