FNT1 Task 1
To: CEO Company G
RE: Company G ratio analysis
This report is a comparison of Company G’s ratios of years 2011 and 2012 and the industry standard. The ratio analysis is accurate to Company G’s data and the recommendations are the opinion of the analysis.
1. Current Ratio:
Company G is showing as an emerging threat in this ratio. This ratio measures a company’s ability to pay short-term obligations. Company G went from 1.86 to 1.77. Even though this ratio is above one quartile industry it is below the standard current ratio trend compared to Home Centers Retail Benchmarks of 1.9. The higher the ratio the higher the ability Company G has the ability to cover a debit. This ratio is above the quartile industry data 2 benchmarks of 1.4 and 2.1.
2. Acid- Test Ratio:
Company G is showing an emerging threat for this ratio. This ratio determines whether Company G has enough short-term assets to cover its immediate liabilities without selling inventory. Usually anything below 1 means the company can’t pay their current liabilities. Company G went from 0.64 in 2011 and 0.43 in 2012. According to Home Center Debt to Worth Benchmarks the standard industry is 1.5. This ratio fell below the quartile industry data of 1.6,0.9 and 0.6.
3. Inventory Turnover:
Company G is showing an emerging threat in this ratio declining from 6.1 to 5.2 and below all three quartile industry benchmarks. This ratio shows how many times Company G’s inventory is sold and replaced over the year. Clearly showing Company G is slowing down. According the Home center inventory turnover benchmarks the average in the industry was 5.4 in 2011 and Company G is falling below. This ratio fell below all quartile industry data of 3.1 ,2.1 and 1.4 for 2012.
4. Accounts Receivable Turnover:
This ratio is a weakness for Company G. This ratio measures the liquidity of Company G’s AR assets. The higher the turnover the more...