SciTronics is a medical device company. In exhibit 1 and 2 financial data sources are given, which are consist of Income Statement, Balance Sheet, and Cash Flow. Financial ratios are useful indicators of a firm 's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm 's financials to those of other firms.
Financial ratios can be classified according to the information they provide. The following types of ratios are discussed in SciTronics case study:
Liquidity ratios Asset turnover ratios
Financial leverage ratios
By analyzing the financial ratios given for…show more content… In this part we are going to measure the riskiness of the company.
SciTronics had improvement on access to external financing. The total asset turnover shows deteriorating form 1.58to 1.53 in the period of 2005 and 2008. The leverage ratio for SciTronics increased from 1.53 to 2.12. This increasing in leverage is a sign of trust-gaining from the market and shows that the company become more sustainable in the market and after time can finance its capital on investment more with debt.
Another sign of the strength on the improvement of access to external sources is the improvement on the liability percentage of the company. SciTronics liability was 34.4% in 2005 and increased to 52.8% in 2008. This improvement has two dimensions; as mentioned before the company is more leveraged on financial investment and other dimension is increase on liability, in case the company doesn’t pay its debt on time leads to bankruptcy.
Another point worth mentioning is responsiveness of SciTronics to external lender and suppliers. SciTronics had improvement in this regard as well. Decrease of SciTronics responds to supplier from 11.63% in 2005 to 8.1% in 2008 shows the company is more prompt in paying its liability to suppliers and lenders.
In the conclusion of this part we can say: the financial riskiness of SciTronics decreased between year 2005 and 2008 due to leveraged financial strategy of the company.
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