Assessing a Company's Financial Future

The remainder of this note discusses each of the steps in the process and then provides an exercise on the various financial measures that are useful as part of the analysis. The final section of the note demonstrates the relationship between a firm’s strategy and operating characteristics; and its financial characteristics.

Asset turnover (T/O) demonstrates how effective the asset base is in generating top line revenue. High T/O values have implications in terms of plant structure, level of backward integration, and aggressiveness of pricing policy. CUMULATIVE PROFITS Formula Cumulative Profits is the total Description of all year 's Net Profit. :

5. SciTronics owed its suppliers $ 6000 at year-end 2008. This represented 8.11 % of cost of goods sold and was a decrease from 11.63% at year-end 2005. The company appears to be more prompt in paying its suppliers in 2008 than it was in 2005.

Total asset turnover : This ratio measures the efficiency of a company’s use of its assets

An assessment of the company’s financial statements will highlight the firm’s management of its risk and opportunities.

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 end 2005. The company appears to be more prompt in paying its suppliers in 2008 than it was in 2005.

In the case of Assessing a Company’s Future Financial Health, the case concentration is on SciTronics, a medical device company, performance measures based on the organization’s three primary financial data sources in Exhibit 1 & 2. Utilizing the 9 steps of corporate financial system, I will be able to analyze the financial health of the company to assess whether it will remain balance over the ensuing 3-5 years. The measures are grouped by focusing on “Financial Ratios” such as: 1.) profitability measures, 2) activity measures, and 3) leverage and liquidity measures. Using the financial data sources, I would be able to make recommendations regarding SciTronics 126 million loan request.

Return on Total Assets was 4.43% which is below five percent. That indicates that the company is not accurately converting its assets into profit. The total for Return on Stockholders’ Equity was 8.89%, however financial analysts prefer ROE to range between 15-20 %. The company’s low ROE indicates that the company is not generating profit with new investments. Lastly, Debt-to-Equity ratio for the company was 1.01 which indicates that investors and creditors are equally sharing assets. In the view of creditors, they see a high ratio as a risk factor because it can indicate that investors are not investing due to the company’s overall performance. The totals of these three ratios demonstrate that the company’s financial state is not as healthy as it should be.

| The ROE decreased in the last year but still in the good margin of profitability.

‎ 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

Another point worth mentioning is responsiveness of SciTronics to external lender and suppliers. SciTronics had improvement in this regard as well. Decrease of SciTronics responds to supplier from 11.63% in 2005 to 8.1% in 2008 shows the company is more prompt in paying its liability to suppliers and lenders.

we saw increase in sales from 11070 to 12223.8, net earnings also boosted from 382.9 to 519.3. Similarly, cash flow from operating activities also increased by 136 million dollars. At the same time, net earnings rose up to 523 million dollars in 2015. On the other hand, total assets upgraded from 4817.4 to

A third activity ratio is the inventory turnover ratio, which indicates the effectiveness with which the company is employing inventory. Since inventory is recorded on the balance sheet at cost (not at its sales value), it is advisable to use cost of goods sold as the measure of activity. The inventory turnover figure is calculated by dividing cost of goods sold by inventory:

SciTronics’ earnings before interest and taxes (operating income) were $26,000 in 2008 and its interest charges were $2,000 Its time’s interest earned was 13 times. This represented an improvement from the 2005 level of 10 times.

According to Sangster and Wood (2012), inventory turnover can also define as ‘stockturn’ or ‘stock turnover’. Besides that, Auerbach (2015) also discussed that inventory turnover might use to estimate on how many times that the stock can be fully transformed to sales within a period. Due to Table 2.1, Matthew’s inventory turnover for year 2014 is quite near while compare to the Industry-norm. Therefore, it may considered as improving because the corporation still able to sell off its inventory in an acceptable pace.