Debt To Equity Ratio Of Diamond Drillers Inc

1162 Words5 Pages
The debt to equity ratio of Diamond Drillers, Inc, is 0.66times < the debt to equity ratio of industry averages is 1.07 times. The debt to equity ratio is a financial, liquidity ratio which compares total debt to total equity of an entity. It illustrates the percentage of entity financing that comes from creditors and investors. The debt to equity ratio of Diamond Drillers, Inc, is 0.66 times and industry averages is 1.07 times. So the debt to equity ratio of Diamond Drillers, Inc, is lower than industry averages. The lower debt to equity ratio indicates that more investor financing (shareholders) is used than creditor financing (bank loans or debts). The lower debt to equity ratio of Diamond Drillers Inc, implies a more financially stable business. The industry with a higher debt to equity ratio are considered more risky to creditors…show more content…
Ross, Randolph W. Westerfield, and Bradford D. Jordan, 2008, p.59) = $45million/$18million = 2.5 times The inventory turnover of Diamond Drillers, Inc, is 2.5 times > the inventory turnover of industry averages is 2.45 times. The inventory turnover ratio is an efficiency ratio that represents how effectively inventory is managed. It measures how many times a business sold its inventories during a year. The inventory turnover of Diamond Drillers is higher than the industry. It is good to have a higher inventory turnover since the Diamond Drillers does not overspend by buying too much inventory and wastes resources by storing non-salable inventory. It also shows that the company can effectively sell the inventory it buys more than the industry. Even the inventory turnover of Diamond Drillers is better than the industry, but it still not so much better different. The larger amount of inventories holding may cause the inventories to become obsolesce or expire and there will be storage costs and other holding costs incur, so it is good to have smaller inventory

    More about Debt To Equity Ratio Of Diamond Drillers Inc

      Open Document