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ADMN-3056: Economic and Management Decision Making Lawson’s Case Assignment #1 Total Number of Pages: 8 Issues and Objectives Lawson’s is facing challenges regarding trade debts in which they are responsible for re-paying. This debt is ultimately affecting the company’s success, and may become a serious issue in the future if net earnings do not rise to an appropriate level. The increased profits will allow Mr. Mackay to focus on the repayments to ensure that loans are taken care of before the interest rates rise, or they become further in debt than they already are. This causes constraints on the company’s ability to invest in other attributes, and make appropriate purchases for the company, due to the decrease in available cash.…show more content…
This higher percentage illustrates more advanced efficiency management of the company, utilization of equity base, and return to investors. The significant decrease in Lawson’s equity may be a concern to his eligibility to ascertain the loan. Based on the review of Lawson’s profitability ratios, the company proves to be successful, although this will likely not remain permanent. The ratios will adjust depending on future withdrawals and other business investments. There is also an indication that the company’s overall value is increasing at a fairly constant rate. In regards to Lawson’s liquidity ratios, the current ratio is constantly declining over a four year period, ranging from 1.02:1 to 2.97:1. With a low of 1.02:1, this indicates that the company is able to pay $1.02 for each $1 of its current liabilities. The ratio has dropped significantly, indicating that there are issues related to liquidity. This may be caused by lack of capital so the company can pay back any deficits. Comparing the ratios to the industries average (1.8:1) supports the idea that Lawson’s lacks performance in this category. This may be problematic in regards to whether or not the company’s short-term assets are readily available to pay off its short-term liabilities. If ratios continue to drop in the future, the company will likely run into more problems regarding debt. Furthermore, the

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