Cango Week 3 Financial Analysis

803 Words4 Pages
Following up with our initial analysis last week, NewGen had the opportunity to review CanGo’s financial statement. The success of a business depends on its ability to remain profitable over the long term, while being able to pay all its financial obligations and earning above average returns. NewGen leveraged our knowledge of Investment rations, breaking our analysis down into four (4) key areas, efficiency, financial leverage, liquidity and profitability. Attached you will find our financial analysis summary matrix.
1. Efficiency Ratio
We began with a look at your efficiency ratio, concentrating on your receivables turn over for the past year. This reflects the time between your sale and actual collection. If a company 's Turnover
…show more content…
b. Your Quick Ratio fell below a 1 to .95. As a common rule of thumb, a quick ratio of greater than 1.0 means a company is sufficiently able to meet their short-term liabilities. With CanGo’s falling below this threshold, could be indicative that your over-leveraged, struggling to maintain or grow sales, paying bills too quickly, or collecting receivables too slowly. This ties into our comments above on yor efficiency ratio (Investigatinganswers, 2012).
c. Working Capital for the past year reflected a negative balance almost 8.5m that will seriously impact on banking institutions percentage against planned activities.
4. Profitability NewGen’s final analysis was on CanGo’s profitability looking at your Return on Assets and Sales. CanGo’s return on assets reflected a .023 indicative that your more asset-intensive and must reinvest more money to continue generating earnings (About.com, 2012). Similarly, CanGo’s Return on Sales (ROS) was .17 (Investopedia, 2012).

References

About.com. Return on Assets (ROA). Retrieved 15 March 2012 from http://beginnersinvest.about.com/od/incomestatementanalysis/a/return-on-assets-roa-income-statement.htm

Accounting explained. Accounts Receivable Turnover Ration. Retrieved 15 March 2012 from http://accountingexplained.com/financial/ratios/receivables-turnover

Accounting Explained. Inventory Turnover Ratio. Retrieved 15 March 2012 from http://accountingexplained.com/financial/ratios/inventory-turnover

More about Cango Week 3 Financial Analysis

Get Access