Corporate Finance

1665 WordsDec 25, 20127 Pages
Part 1: Fianacial Ratios After having the financial information about Deep water experts company, we have generated the financial ratios for the company for the years 2010, 2011 respectively as below and has the following comments: Liquidity: There is more than one ratio that measures the liquidity for a company which is included in the following table: Ratio Type | 2011 | 2010 | Liquidity | Current Ratio | 3.29 | 2.67 | Quick Ratio | 2.2 | 1.798 | Cash Ratio | 1.56 | 1.08 | 1. Current ratio: indicates a company's ability to meet short-term debt obligations. For 2011= 3.29 and for 2010= 2.67. From creditor's view a high current ratio is better than a low current ratio and as we can see it increased in 2011.…show more content…
For 2011= 9.3 and for 2010= 12.89 We can see that the ratio decreased which indicates a lower sales efficiency in 2011. 2. Receivable turnover: it measures the velocity of a company's debt collection, the number of times average receivables are turned over during a year. For 2011= 23.35 and for 2010= 23.37 It is stable and no changes however it shows that the management is efficient in collecting their accounts receivables. 3. Total asset turnover: measures the efficiency of a company's use of its assets to product sales. For 2011= 1.086 and 2010= 1.16. We can see it decreased in a small percentage, this means that it had a higher profit margins in 2010. Profitability: Profitability 2011 2010 | Profit Margin in % | 5.2 | 6.2 | EBTIDA Margin | 17% | | Return on Asset in % | 5.65 | 7.22 | Return on Equity in % | 11.3 | 12.4 | There is more than one ratio that measures profitability for a company. 1. Return on equity: It reveals how much profit a company earned in comparison to the total amount of shareholder equity. For 2011= 11.3 and 2010= 12.4. We can notice it decreased which means that profit the company earned in 2011 is less than 2010. 2. Return on asset: measures the amount of profit made by a company per dollar of its assets.