Dynashers Case Study Essay

854 Words Feb 8th, 2012 4 Pages
Finanical Analysis

Dynashears Case II

Anne Putnam 1

Case Study of the Risk Management Memorandum of Dynashears INC:
Liquidity In analyzing liquidity of the company, the current ratio is not very telling of a falling company. The company increased its ratio throughout the period of the income statement thus building upon its company assets and allowing for a 6-1 ratio of assets over its liabilities. This implies the company is still able to operate sufficiently even though it did not make its optimum current ratio of about 8-1. However, when one takes the inventory out of the equation with the quick ratio, the numbers show the true strength of short term liquidity. The numbers are still good, and do not indicate failure – but are
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The turnover in days has increased by thirty days – adding a whole month to old inventory. The company is still producing at a rate of higher sales and allowing for an overstock of excess inventory piling up within their warehouses. The accounts payable has increased, where the company has tried to extend the days they pay back the liabilities – assumedly to match the increase in their accounts receivable. The company is clearly hoping everyone is on the same page with the lax attitudes towards payments during the economy slump. The cash conversion cycle has increased exponentially – far above the predicted average. The excess inventory in the firm is tying up a lot of the cash and therefore disallowing the ability to move it. Also the slack in AR is contributing to the increase.

Finanical Analysis

Dynashears Case II

Anne Putnam 2

Profitability The company has come to a standstill with profits, in hopes to maintain a more efficient practice and continue expansion, Dynashears continued to borrow substantial amounts of working capital from the bank and ended up falling far short of the predictions for sales. The plant modernization project initially predicted a lot less money as well – and the additional funds requested put a strain on the ability to make profits. The gross profit margin dropped from 22% to14, when the projections hoped it would actually increase. The health of the company is in decline, and now has a slightly

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