Assessing a Company Future Financial Health Essay

1171 Words Dec 16th, 2012 5 Pages
Assessing a Company’s Future Financial Health

In this case the concentration is on “Company Performance Measurement”, using the “Ratios”, ‎before we answer to the question, we have to focus a bit on the “Financial Ratios”‎
Sales Growth: The increase in sales over a specific period of time, often calculated ‎annually.‎
In this specific Case, that has asked the Sale growth for the four-year period, can be calculated ‎as bellow;‎
‎ ((Ending Value)/(Beginning Value) )^((1/(# of Year)) )-1 ‎
‎= ($244,000/$115,000) = (1+r) ^4 compound rate, = 21%‎
Profitability Ratios: it shows how profitable the Company is;‎
Profits as a percentage of sales in 2008;‎
Income/Sale = 14000/244000=0.0573*100=5.73%‎
Profits as a percentage of sales
…show more content…
Its activity during 2008 as measured by the cost of goods sold was $74,000 ‎‎(COGS). It therefore had an inventory of turnover of 2.55 (74,000/29,000) times. This represents an ‎improvement from 2.04 (43,000/21,000) times in 2005.‎

‎ 4. SciTronics had net fix assets of $18,000 (net fix assets) and sales of $244,000 in 2008. Its fixed asset ‎turnover ratio in 2008 was 13.56 (244,000/18,000), a deterioration from 16.33 (147,000/9,000) in 2005.‎

Leverage Ratios: How Soundly Is the Company Financed?‎

‎ 1. SciTronics’ ratio of total assets divided by owners’ equity increased from 1.52 (93,000/61,000) at ‎year end 2005 to 2.12 (159,000/75,000) at year-end 2008.‎
‎ 2. At year-end 2008, SciTronics’ total liabilities were of its
total assets was 52.83% (48,000+7000+20000+9000/159000), which compares with 34.4% ‎‎(21,000+11,000)/93,000).‎

‎ 3. The market value of SciTronics equity was $175,000,000 at December 31, 2008. The total debt ratio ‎at market was 32.4% (84,000/84,000+175,000).‎

‎ 4. SciTronic’s earnings before interest and taxes (operating income) were $26,000 in 2008 and its ‎interest charge were $2,000. Its times interest earned were 13 times. This represents an improvement ‎from the 2005 level of 10 times.‎

‎ 5. SciTronics owed its supplies $6,000 at year end 2008. This represents 8.1 percent (6,000/74,000) of ‎cost of goods sold and was a decrease from 11.63% (5,000/43,000) at year…