Financial Analysis : Hertz's K Annual Form

The current ratio directly relates the company’s current assets against its current liabilities. A good current ratio will be over 1. For example if the current ratio were 2.0 this would mean that the company’s current assets are twice as large as its current liabilities. For Tesla Motors the current ratio drops significantly over the years. It starts at 2.76 in 2010, then drops to 1.95 in 2011, and finally reaches 0.97 in 2012. As you can see the current ratio in 2012 is below one. The current ratio of 0.97 means that as of December 2012, Tesla Motors has more current liabilities than current assets.

2) One way that Hertz conforms to be an “ideal LBO candidate” is the proven financial performance and pretax profit the company has generated since 1967. In addition, from 1985 to 2005, revenues

A more tell tale sign is the quick ratio, or acid test, which has increased year after year. Debt to total assets has decreased over 5% since 2001, indicating less financing of current and long term debt and more company assets. Their cash debt coverage far surpasses the ideal 20%, indicating a high level of solvency with sufficient funds and assets to satisfy all debtors. Asset turnover has more or less maintained at right around 1.6, signifying a turnover rate of just less than 180 times per year.

Likewise, it has a low inventory level in relation to its revenues. As shown above the inventory is only 5 days or a turnover rate of 71 times per year.

Sales took the most percentage of total revenue. The revenue of sales increased gradually from $ 214,934 (in thousands) in 2010 to $ 260,832 in 2012 while the figure of royalties reduced gradually from $ 873 in 2010 to $ 681 in 2012 (in thousands). The revenue of other income increased from $ 1,286 to $ 1,325 during this period and then the figure decreased dramatically to $ 533 in the financial year 2012. In addition, in the financial year 2012, a new resource of revenue called membership was developed with the figure of $54.

* Current ratio of 3.53 shows that Adidaz is in a healthy situation and has the ability to pay off future debt. (Increase of 0.45).

11. Accounts receivable turnover and days sales in accounts receivable for the last three years:

Receivables Turnover: This shows the degree of realization in accounts receivables. Company N has a lower turnover rate, a lower rate implies that receivables are being held longer and the less likely they are to be collected. Also there is an opportunity cost of tying up funds in receivables for a long period of time. Company M is 29 times higher than company N.

Inventory turnover in days is an assistant figure of inventory turnover. The shorter of the days, the faster of the inventory turning to cash, and the better use of short-term capital. This figure of the firm was very high in 2001 and began to fell down from 2002,then lower than industry in 2004 and 2005.This indicates the management of the firm became better.

Accounts receivable turnover is the second method by which a company’s trade receivables’ liquidity can be evaluated (Gibson, 2011). Žager et al. (2012) noted turnover ratios should be as high as possible as this indicates a firm’s ability to convert its assets more often. 3M’s accounts receivable turnover for years 2007 and 2008 is shown in Exhibit 2. In 2007, 3M turned its accounts receivable over 7.12 times and 7.70 times in 2008. This calculates into a turnover of its accounts receivable every 51.28 days in 2007 and 47.38 days in 2008. The increase in accounts receivable turnover times per year (decrease in number of days to turnover accounts receivables) from 2007 to 2008 is a positive trend for 3M. It suggests, along with the prior calculation, the management of receivables is likely to be improving in efficiency.

Accounts receivable turnover measures the average time it takes for a firm to collect on credit sales. Harley Davidson's accounts receivable turnover rate is 6.75 times for 2001 and 8.74 times for 2000. This accounts receivable turnover rate seems low and would indicate that Harley Davidson is able to turn their receivables into cash quickly.

Asset turnover ratio is also increasing in 1994. It shows that total assets are being efficiently used in producing revenues.

The quick ratio reflects on a company’s ability to meet its current liabilities without liquidating inventories that could require markdowns. It is a more stringent test of liquidity than the current ratio and may provide more insight into company liquidity in some cases. For Colgate-Palmolive, the quick ratio has declined from 0.73 in 2008 to 0.58 in 2010. While this does not necessarily mean a problem, a higher current ratio and quick ratio analysis will mean that the company will not have difficulty in meeting its short-term obligations from its operations and not by liquidating its assets.

Because the current ratio measures a company’s ability to pay back short term loans I would be less uncomfortable with the slight drop in liquidity from Coca-Cola rather than the substantially larger drop from PepsiCo. Both current ratios are quite healthy though when compared to others in the industry.

The first ratio to evaluate is the Current Ratio, which is calculated as current assets divided by current liabilities. Halliburton’s 2010 current ratio is 3.22, which improved from 2.99 in 2009 and from 2.66.in 2008. This ratio shows that Halliburton has a strong increasing liquidity and is in much better shape than its competitors. Baker Hughes has a 2010 current ratio of 2.77