Analysis : The Return On Average Income Ratios

In 2009 the company ratio was 1.02 and climbed up to 1.03. This means that the company will take up their profits in future of which is a good sign.

First of all, return on asset (ROA) is a ratio used to measure how efficient a company generates profit using its assets, which is the invested capital. We noticed that HH’s ROA was increasing from 2006 to 2010. However, HH’s ROA for 2011 dropped dramatically from 18.41%(year

The Current Ratio is used to identify whether or not a company can pay its current obligations.

In regards to current ratio we can see that CVS improved from 2009 to 2010, but in 2011 it fell once again. The higher the current ratio the more favorable it reflects on the company; in 2010 for every dollar of current liabilities the company had $1.60 of current assets to pay back its short term liabilities. Current cash debt coverage ratio demonstrates a better understanding of the company’s average day standing. Liquidity improved for CVS from 2009 to 2011.

The debt ratio explains the amount of debt maintained by both respective companies, and represents the amount of debt used by the company to finance business operations and is

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.

The Debt Ratio, projects the relationship between the total assets and total debts of the company. This ratio is used to measure the financial risk of the company. In order to measure the financial risk, we need to look at the amount of debt that the company has incurred due to the financing of operations. This is done by comparing the total debt to the total assets of the company, from there we derive a debt percentage. The total debt amount includes, current and non-current liabilities. Whilst, the total assets amount includes, current and non-current assets. The overall ratio is expressed as a percentage. This percentage indicates how much of debt is incurred by the company, when financing its operations. If the overall percentage is high, it implies that the company is at a financial risk as there is a relatively high proportion of debt.As potential investors would not want to in a company which has a high percentage of debts.Whilst a low overall percentage, the company is at a low financial risk and are handling their debts well. The

The Debt to Total Asset Ratio is a ratio that shows the financial risk of a company by

The company currently has a current ratio of 14:1. This is bad because the company is not managing its assets properly.

The ratio measures the company’s ability to meet its debt obligations. It allows investors to see to what extent company’s earning can decline without the firm being unable to pay its annual interest costs. Nevertheless, a high ratio can indicate that a company has an undesirable lack of debt or it is paying too much debt with earning that could be invested in other projects.

The interest coverage ratio of Massachusetts Stove Company at year eleven is 1.68 which is below 2; meaning that they might not even have the capacity to pay their

The debt to asset ratio measures the amount of total assets that are financed by creditors instead of investors. It shows what percentage of assets is funded by borrowing compared with the percentage of resources

We can draw a number of conclusions about the financial condition of these two companies from these ratios. Whole Foods Market Inc. has a high degree of liquidity. Based on its current ratio, it has $2.54 of current assets for every dollar of current liabilities. The quick ratio reveals a safe level of liquidity even excluding its inventory, with $1.54 in assets that can be converted rapidly to cash for every dollar of current liabilities. Solvency ratios are high and lessen financial leverage (5). The overall debt is three times equity, and 2/3 of assets are purchased on credit. Nearly half of noncurrent assist are intangible. Debt to tangible asset Ratio ($53/$61) – is 0.87, which means that over 85% of tangible assets are purchased on credit. To summarize, Whole Foods has an adequate

Lawsons 2010 and 2011 current ratio are above the industry average (1.8:1) however in 2012 the current ratio falls below the industry average at 1.55:1 and than again in 2013 to 1.02:1. This indicates that the company’s ability to pay its debts is

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.