Riordan's Manufacturing Financial Ratios

1829 Words Jun 20th, 2009 8 Pages

Riordan Manufacturing’s Financial Ratios
University of Phoenix
Riordan Manufacturing’s Financial Ratios Riordan Manufacturing, a global plastics manufacturer was founded by Dr. Riordan in 1991. Today the corporation has expanded from the fan manufacturing plant in Michigan into a manufacturer employing 550 people with projected annual earnings of $46 million. Riordan’s has facilities located in America and China and the major customers are automotive parts manufacturers, aircraft manufacturers, the Department of Defense, appliance manufacturers, and beverage makers and bottlers (Apollo, 2006). In an attempt to evaluate the success of Riordan a financial ratio analysis is being
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Riordan’s debt ratio for 2004 and 2005 exhibits Riordan’s ability to control spending in relation to their income or ability to liquidate and pay. Riordan’s debt ratio is at 36% and 36% or lower is the ideal amount of debt to carry (Credit Basics). Although 36% or less is ideal, Riordan should attempt to lower the ratio a bit in order to stay at a reasonable rate.


Table 4: Gross Profit Margin

Gross profit margin ratio will define an organizations financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold (Investopedia). The gross profit margin literally measures how much of every dollar of sales a company is able to actually keep (Answers, 2009).
The table below shows the gross profit margin for Riordan for 2004 and 2005:

2005 2004 Gross profit $8,786,061 17% $8,564,238 19%
Net sales $50,823,685 $46,044,288

Riordan had a gross profit margin of 17% in 2005 and 19% in 2004 meaning that the company has a net income of 17 cents for every dollar compared to 19 cents in 2004. Looking at the earnings of a company does not tell the whole story and the decrease from 19% to 17% should grab the attention of management but there is no need for panic (Answers,

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