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Interpreting Financial Results

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Interpreting Financial Results
FIN 571
January 6,2014

Interpreting Financial Results
In the analysis four major categories of ratios are calculated. The major classes of ratios are: liquidity ratios, debt/solvency/leverage ratio, activity/efficiency ratio and profitability ratio.
The liquidity position of the company was not bad in any of the two years, but in 2010 the per unit current asset available for per unit current liability had decreased. The company’s cash is hand was very high in 2010. Which enhanced the company’s cash position ratio in 2010.
Among the ratios calculated, profitability ratios are the simplest.Little financial knowledge is necessary for understanding the profitability ratios.As the profitability ratio; gross margin, operating margin, net margin, EPS, ROA and ROE are calculated. Only the gross margin had increased in 2010 from 2009. The other probability ratios are highly dissatisfactory, especially the ROE.
Turning the focus into the activity/solvency ratio also gave a similar picture as was captured from the profitability ratio. There was an increase in the average collection period either due to lose administration of the management or the company became liberal and loosed the credit policy. The efficiency level with which sales were generated in 2009 with the assets of the company fell abruptly in 2010. This again indicated the looseness of administration in using the assets of the company efficiently. From this, we can infer that the increase in average collection period is also due to the loose administration of the company.
The solvency ratios actually measure is the firm solvent enough to pay all the long term obligations of the firm. Several ratios have been calculated for determining the solvency of the firm. All the ratios support the fact that still the company has the capacity of taking a large amount of debt. The…...

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