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Ratio Analysis

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Submitted By ukathir42
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Pages 5
Umirajah Kathirgamathas
Professor Westwater
Financial Management
5/26/16

Financial Analysis Project

Liquidity Ratios

Current Ratio 2013 | 3.07 | 2014 | 2.68 | 2015 | 1.75 |

Quick Ratio 2013 | 1.66 | 2014 | 1.08 | 2015 | 0.73 |

Asset Management

Average Collection Period 2013 | 36.5 days | 2014 | 36.5 days | 2015 | 54.74 days |

Inventory Turnover 2013 | 9.03x | 2014 | 5.59x | 2015 | 4.19x |

Fixed Asset Turnover 2013 | 11.5x | 2014 | 11.95x | 2015 | 12.10x |

Debt Management

Total Debt to Total Assets 2013 | 40% | 2014 | 46% | 2015 | 59% |

Times Interest Earned 2013 | 3.33x | 2014 | 7.96x | 2015 | 1.49x |

Profitability

Profit Margin 2013 | 5% | 2014 | 3% | 2015 | 0.3% |

Return on Equity 2013 | 29% | 2014 | 16% | 2015 | 1.2% |

DuPont Equation Year | Profit Margin | Total Asset Turnover Ratio | Equity Multiplier | 2013 | 0.05 | 3.05 | 1.68 | 2014 | 0.03 | 2.60 | 1.86 | 2015 | 0.003 | 2.03 | 2.48 |

For the past few years ABC Company’s performance has changed a considerable amount. When deciding if ABC Company deserves the loan of $1,000,000 that is necessary for its up coming selling cycle one must look at various aspects of the company’s performance to determine the level of risk that is associated with the loan. Four key aspects of the company that need to be looked at are its liquidity, efficiency, leverage and profitability. In regards to liquidity the firm has been struggling. Its current ratio has gone from 3.07 to 1.75 while its quick ratio has gone from 1.66 to 0.73. This indicates that the firm’s short-term debts have been increasing while its short-term assets and cash balances have remained stagnate/ decreasing. Compared to the industry averages for current and quick ratios, 2.5 and 1.0 respectively, ABC has not been living up to

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