Memorandum

A. Current Ratio (Year 11=1.86- Year 12=1.77)
Current ratio is a company’s ability to pay short term obligations. This ratio represents a weakness for the company because the numbers do not meet standards. This figure decreased slightly from 1.86 to 1.77 from year 11 to year 12. When we compare these numbers to the industry quartiles this ratio falls below the first and second quartile and above the third.
B. Acid Test Ratio (Year 11=.64- Year 12=.44)
Acid test ratio is the “volume of short-term assets to cover its immediate liabilities (investopedia)” without selling inventory. Any number below 1 for this ratio mean liabilities cannot be paid. From 2011 to 2012 this figure dropped for company G and is clearly below 1. It falls below the first, second and third industry quartiles which are 1.6, .9 and .6. There is reason for concern for company G when considering this ratio.
C. Inventory Turnover (Year 11=6.1- Year 12=5.2)
Inventory turnover is a ratio that shows how many times a company’s inventory is sold and replaced over a period (investopedia)”Company G decreased from 6.1 to 5.2 from year 11 to 12. This figure falls below all three quartile. Once again this weakness for Company G.
D. Accounts Receivable Turnover(Year 11=32.2- Year 12=30.7)
This is a ratio of net credit sales of a business to its average account receivable.Company G had a 32.2 in year 11 and dropped to 30.7 in year 12. This ratio is another weakness for company G as it falls below all three of the industry quartiles. Because this number is low, credit requirements will be strict for customers which will cause Company G’s ability to lend credit to be low.
E. Day’s Sales in Receivables (Year 11=11.1- Year 12=11.9)
This is the average number of days a business takes to collect its trade receivables. This ratio has increased for Company G over the last year. It falls below the first two quartiles but above the third. This would represent strength for the company. The cash supply that is built by this company happens fairly quickly.
F. Debt Ratio (Year 11=28.34- Year 12=29.76)
This represents the amount of debt relative to a company’s assets. Company G went from 28.34 to 29.76 from year 11 to year 12. This figure of 29.46% for year 12 falls below all three industry quartiles. For this reason, the debt ratio is strength for the company.
G. Times-Interest Earned Ratio (Year 11=31.12 Year 12=36.50)
This is the ratio of earnings prior to any tax or interest over a certain period.Company G went from 31.12 all the way to 36.50 from year 11 to year 12. The figure 36.15 is above all three industry quartiles. This is strength for Company G as is show that it has ability to pay off its debt.
H. Ratio of Return on Net Sales (Year 11=5.43- Year 12=6.43)
This ratio represents the efficiency of a company’s overall operation. This figure increased from 5.43 to 6.43 from year 11 to year 12. The figure 6.35% for 2012 is below the third quartile and above the first and second quartile. There is no reason for concern for this ratio.
I. Rate of Return on Total Assets (Year 11=12.30- Year 12=14.52)
This ratio represents how profitable a company in relation to its total assets. The figure 14.52% for year 12 is an increase from year 11. This figure falls below the first quartile and above the second and third quartiles. This is strength for Company G.
J. Rate of Return on Common Stockholders Equity (Year 11=20.20- Year 12= 19.61)This is “the amount of net income returned as a percentage of shareholders equity (investopedia).” Year 11 was a bit better than year 12. This figure for Company G is above all three quartiles. This represents a strength for the company.
K. Earnings Per Share of Common Stock (Year 11=$0.672- Year 12=$1.08)
This is an important number when looking at the price of a share as it indicates profitability for a company. This number has increased from year 11 to year 12. The figure for year 12 is above all three industry quartiles. This would indicate an area of strength for Company G.
L. Price Earnings Ratio (Year 11=$5.21- Year 12=$5.23)
Investors look at the price earnings ratio to determine how much money they can make. A company with a higher price earnings ratio generally allows these investors to make more than a company with a lower one. There is a slight increase in this ratio from year 11 to year 12. This figure falls below all three industry quartiles. This is another weakness for Company G.
M. Book Value Per Share of Common Stock (Year 11=$4.25- Year 12=$5.87)
This ratio shows “the level of safety associated with each individual share after debts are paid accordingly (investopedia).” Company G has a higher book value in year 12 than in year 11. This figure falls below all the first quartile and above the second and third making this and area of strength for the company.
Overall Company G would be a safe company to invest in. There are a few weaknesses to consider but it is fairly average within industry standards.

Investopedia, retrieved from http://www.investopedia.com, November 4, 2013.

Net income-preferred dividends/average common stockholders equity
Market price per share / earnings per share