Riordan Manufacturing Analysis

3094 Words Mar 9th, 2008 13 Pages

Riordan Manufacturing Analysis
University of Phoenix Online
BSA 500 Abstract
Riordan Manufacturing is a global plastics manufacturer and a leader in the field of plastic injection molding. This paper will provide a brief background history of the company, some identified core values, ratio analyses, a variance analyses on the companies financials, an analysis of the current accounting systems and recommendations on providing appropriate communicative and data gathering software for the future accounting systems.

Riordan Manufacturing Analysis
The objective of this paper is to provide an analysis of Riordan Manufacturing’s financial situation and its current financial system. Included in
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The Quick Ratio for its industry is 1.3.
Financial Leverage Ratios These ratios are used to provide an insight of the long-term solvency of a company. They differ from Liquidity Ratios by indicating how a company is using its long-term debt.
Debt Ratio = Total Debt/Total Assets.
Debt Ratio: 2003 = 14,158,976/35,637,504 = 0.39 = 39.7% 2004 = 12,160,256/33,856,256 = 0.35 = 35.9%
A Debt Ratio above 100% indicates that a company has more debt than equity. Riordan has a low level of debt compared to its equity, which informs us that it is safe to lenders and investors. The Debt Ratio for its industry is 1.85.
The Interest Earned Ratio shows how a company's earnings can pay for interest payments on debt.
Interest Coverage = EBIT/Interest Charges
(EBIT = Earnings before interest and taxes).
Interest Coverage: 2003 = 4,020,541/217,092 = 18.5 2004 = 3,246,122/230,221 = 14.1
Not only does a lower times Interest Earned Ratio signifies that less earnings are accessible to meet interest payments but also the company is more susceptible to increases in interest rates. The interest earned ratio for its industry is 15.5.

Profitability Ratios
Profitability Ratios indicate a company's ability to generate profits.
Gross Profit Margin = Sales – Cost of goods sold/Sales.
Gross Profit Margin: 2003 = 43,418,370 - 34,517,604/43,418,370 = 0.20 = 20% 2004 =