Interpreting Financial Results
This paper will address the UOPX sample financial statements with the calculated financial ratios, and interpreting of those results against historical data and industry benchmarks. On page four is the full list of data and calculations; however, this paper will focus on the two most commonly viewed and universally accepted business indicators, the quick and current ratios.
Our UOPX sample company data
UOPX (2013)
Sample Industry Financial Ratios |
|
Other repair and maintenance: | 2010 |
Corp Average Financial Ratios | |
Return on Sales | 6.68% |
Return on Assets | 17.53% |
Return on Net Worth | 47.99% |
Quick Ratio | 1.15 |
Current Ratio | 1.6 |
Inventory Turnover | 18.89 |
Assets: Sales | 0.38 |
Tot Liabilities: Net Worth | 1.74 |
BizStats (2012)
The UOPX Company has experienced a variance in 2010 from 2009, in respect with these ratios and that shows both growth and a decrease respectively. Below is the breakdown of both ratios, and why each area is important in the financial environment.
The quick ratio, which measures the dollar value of assets, compared the liabilities, meaning that in 2009 they had only $ .12 per dollar of liabilities. In 2010, that number rose to $ .41 showing an increase or growth; however, in the comparison to the industry this number is very low the industry has an aim for above $1. That would mean break-even or better.
As for the current ratio, which measures the ability of a business to payback debts, the higher the current ratio the better for the company to payback what it owes or could borrow. If the ratio were less than 1.00 it would mean that the company would not be able to payback debt and would be a high risk for investment. Our UOPX company had a 1.78 in 2009 that is extremely strong;...