Company A has high receivables (31.7%) and high property and equipment (30.2%) in the assets side; it also has high notes receivables (38.4%) and long term debt (17.4%) in the liabilities and equity side. Whereas its ratios are as follows:
• Its profit margin (Net Income / sales) is equal to 0.04 or 4 %. This ratio measures how much out of every dollar of sales a company actually keeps in earnings, which is in this case equal to 4 percent from the total amount of sales.
• Its Return on Assets ROA (Net Income / Assets) is equal to 0.03 or 3%. ROA gives an idea as to how efficient management is at using its assets to generate earnings, which is equal to 3 percent from the total amount of assets.
• Its Return on Equity ROE (Net Income / Equity) is equal to 0.29 or 29%. It is a measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested, which is equal to 29% of total Equity.
• Its Assets Utilization (Net Sales / Assets) is equal to 0.78 or 78%. It gives an insight into the overall slack that is in the firm at a given point in time. In this firm it is equal to 78 percent of its total capacity or available assets.
• Collection Period is equal to 149 days. It is a measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. It is equal in the case of this firm to 149 days to collect all its current receivables.
• Inventory Turnover is equal to 11 times. It shows how many times a company's inventory is sold and replaced over a period. This is equal to 11 times per year.
• Debt Ratio (Total Liabilities / Total Assets) is equal to 0.89 or 89%. It gives an idea to the leverage of the company along with the potential risks the company faces in terms of its debt-load. This firm is 89 percent financed from its debt.
• Long term debt / Total Equity is equal to 1.6 times. It can identify the amount of leverage utilized by a specific...