i) What can you say about the company's liquidity position in 2002, 2003, and as projected
The following ratios were extracted from the books of Cartel limited.
Liquidity ratios (Current and Quick ratios)
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Liquidity ratios |
2002 |
2003 |
2004 |
Industry Average |
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2.33 |
1.46 |
2.58 |
2.70 |
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Quick Ratio |
0.85 |
0.50 |
0.93 |
1.00 |
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i) What can you say about the company's liquidity position in 2002, 2003, and as projected for 2004? ii) How are these liquidity ratios useful to the managers of the company? |
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b) Asset management ratios (Inventory turnover, days sales outstanding , fixed assets turnover, operating capital requirement, and total assets turnover)
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How does Cartel Limited’s utilization of assets stack up against other firms in its industry?
c) Debt management ratios (debt, times-interest-earned, and EBITDA coverage ratios). |
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Debt Management ratios |
2002 |
2003 |
2004 |
Industry Average |
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Debt Ratio |
54.8% |
80.7% |
43.8% |
50.0% |
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Times Interest Earned |
3.35 |
0.10 |
6.28 |
6.20 |
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EBITDA Coverage Ratio |
2.61 |
0.81 |
5.52 |
8.00 |
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- How does Cartel Limited’s compare with the industry with respect to financial leverage?
- What can you conclude from these ratios?
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