'Ratio Analysis Memo Essay\r'

'The runniness, reachability, and solvency balances advertise some interesting points ab let on Kudler hunky-dory Food’s financial position. The liquidity symmetrys revealed that during 2002 and 2003, Kudler was having no trouble returning short debt. However, the current and acid-test (quick) symmetrys showed that during 2003 Kudler had an excess amount of capital that they were not investing properly. These proportionalitys excessively showed that Kudler was store receivables and selling average inventory real quickly. The winningsability balances revealed that during 2002 and 2003, Kudler was using summations efficiently and qualification a decent salary. The attain marge ratio showed that during 2002 Kudler do a inter crystalize of four cents per one dollar bill, and during 2003 they made a proceeds of roughly six cents per dollar. In addition, the output on assets ratio (which is also a profitability ratio) showed that Kudler utilized their ass ets efficiently seemly to turn a profit. The solvency ratio used, which was the debt to positive assets ratio, showed that during 2002 and 2003 Kudler only had around a cast of their assets financed in debt. All of these ratios show that Kudler was a fairly starchy society financi everyy during 2002 and 2003. When trying to figure out how prospering Kudler Fine Foods is, it is critical to review all financial statements. By using the level and vertical analysis and the determining ratio calculations the profitability, liquidity, and solvency are figured. A specific ratio analysis may intrigue a particular customer. Lenders or suppliers would be elicit in the liquidity ratio because the guild’s likelihood to pay mangle short-term debt is obvious.\r\nThe profit of the bon ton determines the likely impending success and would be key to creditors and investors. The solvency ratios show if the play along depart kick the bucket out to learn and stockholders or fin ancial analysts would be interested in these ratios. plus perturbation is the amount of gross sales or revenues produced per dollar of assets. The Asset Turn everyplace ratio is a gauge of the productivity in which a company is using its assets. The number of multiplication is reason by the last-place sales carve up by the average assets. Usually, the juicyer(prenominal) the ratio, the better it is, since it implies the company is generating more than revenues per dollar of assets (â€Å"Investopedia”, 2014). The asset turnover ratio tends to be higher for companies in a celestial sphere like consumer staples, which has a relatively dwarfish asset base moreover high sales volume. On the other hand, companies in areas like utilities and broadcastings, which know large asset bases, will have deject asset turnover. Kudler Fine Foods asset turnover ratio shows that from 2002 to 2003 there was not much of an plus. However, the per centum does improve at a .3% incr ease from year to year. A profit allowance account is a ratio of profitability figure as simoleons income divided by revenues, or net profits divided by sales (â€Å"Investopedia”, 2014). It measures how much out of every dollar of sales a company actually keeps in earnings.\r\n make headway boundary line is valuable when reviewing companies in comparable to(predicate) trades. A higher profit rim shows a more profitable company that has a healthier govern over its costs compared to its competition. Profit margin is shown as a percentage. Therefore, for instance, a 20% profit margin means the company has a net income of $0.20 for each dollar of sales. spirit at the earnings of a company does not forever convey the unscathed story. Increased earnings are noble, but an increase does not mean that the profit margin of a business is acquiring better. For example, if a corporation has costs that have gotten larger faster than sales, it indicates a lower profit margin. This leads to the fact that costs urgency to be policed better. Kudler Fine Foods has a net income of $465,573 from sales of $11,698,828, giving it a profit margin of 4.0% ($465,573/$11,698,828). The next year net income rises to $676,795 on sales of $10,796,200, the company’s profit margin raise to 6.3%. So while the company increased its net income, it has done so with diminishing profit margins.\r\nThis is said because the return on assets ratio is low. When it is low the company uses less specie on more investment. The profit margin is low as well calculated at only .6% showing that Kudler Foods had a low profit at that describe time. The debt to total assets ratio was .28%, which showed the company is healthy. The clock interest earned ratio was 9.8%, which backs up claims of financial health. The solvency ratio shows Kudler Foods can pay back long-term obligations. Each ratio has different users interest in mind. come on common stockholder’s equity is defined as mesh topology Income / nitty-gritty Capital, and communicate on greens Stockholders’ Equity: 676,795 / 1,928,960 = 35.09% reproduction. Here is a par of this (2003) information to the same information from last years’ (2002) records to begin to determine a trend. Profit moulding (2002), $647,645 / $10,644,800 = 6.08 % Margin comeback on Assets (2002), $2,675,250 / $10,796,200 = 24.78% draw Asset employee turnover (2002) $10,644,800 / $2,271,400 = 4.69 time Return on customary Stockholders’ Equity (2002) $647,645 / $1,928,960 = 33.58% Return 2002 division 2003 Year Profit Margin 6.08% Margin 6.27% Margin Return on Assets 24.78% Return 25.3% Return Asset Turnover 4.69 time 4.04 propagation Stockholder’s Equity 33.58% Return 35.09% Return The information that was examined indicates that Kudler Foods is doing well and if the company continues on its current path, profits will continue to grow, as long as other economic conditions stay the same. \r\nWe conducted a vertical analysis of the balance weather sheet and income statement and found that these figures indicated that the company is strong, and there were not any negative figures, which is always a pricy sign. Some of the total were low, but that also was a good indicator, as the low numbers were the consanguinity between the expenses against the net sales. This indicates that there were more than enough sales to cover the expenses. We also found that when comparing the net sales against the net profits, the percentage was a patch low, but still within a strong range. Overall Kudler Foods is a strong business that will continue to grow as it is managed carefully and changes are made when necessary to adjust to the market itself.\r\n flow Ratio\r\nCURRENT ASSETS/CURRENT LIABILITIES\r\n2002: 2,102,631/977,188 = 2.14:1\r\n2003: 1,971,000/116,290 = 16.95:1\r\nAcid-Test Ratio\r\nCASH + short-run INVESTMENTS + RECEIVABLES ( mesh)/CURRENT LIABILITIES:\r\n1 2002: 89,016 + 1,131,213 + 196,503/977,188 = 1.45:1\r\n2003: 1,430,000 + 86,000/116,290 = 13:1\r\nReceivables Turnover\r\n clear up credit entry SALES/ norm NET RECEIVABLES = X TIMES\r\n2002: 10,107,787/185,907 = 54.4 Times = all(prenominal) 7 Days\r\n2003: 10,796,200/141,251 = 76.4 Times = Every 5 Days\r\nInventory Turnover\r\n follow OF GOODS SOLD/AVERAGE INVENTORY = X TIMES\r\n2002: 7,543,054/355,534 = 21 Times = Every 17 Days\r\n2003: 8,474,831/401,634 = 21 Times = Every 17 Days\r\nAsset Turnover\r\nNET SALES/AVERAGE ASSETS = X TIMES\r\n2002: 11,698,828/4,793,146 = 2.4 Times\r\n2003: 10,796,200/3,984,733 = 2.7 Times\r\nProfit Margin\r\nNET INCOME/NET SALES = X%\r\n2002: 465,573/11,698,828 = 4.0%\r\n2003: 676,795/10,796,200 = 6.3%\r\nReturn on Assets\r\nNET INCOME/AVERAGE ASSETS = X%\r\n2002: 465,573/4,793,146 = 9.7%\r\n2003: 676,795/3,984,733 = 17.0%\r\nReturn on Common Stockholders’ Equity\r\nNET INCOME †PREFERRED DIVIDENDS/AVERAGE COMMON STOCKHOLDERS’ candor = X% 200 2:\r\n465,573 †0/3,396,887 = 13.7%\r\n2003: 676,795 †0/2,274,380 = 29.8%\r\nDebt to Total Assets\r\nTOTAL DEBT/TOTAL ASSETS = X%\r\n2002: 1,491,747/5,294,216 = 28.2%\r\n2003: 746,290/2,675,250 = 27.9%\r\n'