Question

Review the financial ratios for Medical Associates. Select one of the ratios and recommend one or two strategies to improve that ratio in terms of liquidity, profitability, or financial efficiency.

Medical Associates

CR-2.5

Cash on Hand-26.29

AR-53.46

Total Margin-4.4

ROA-3.1

RE-3.4

Debt Ratio-.27.50

Total Asset Turnover-.7

Answer 1

I will pick the total asset turnover ratio :

it is the ability of the company to generate revenue from its assets by efficiently utilising the assets .

Here, for every $1 worth of assets, the company only earns 7 cents in revenues. Ways to improve this ratio is:

• The company should focus towards improving its sales. The inventory would be utilised efficiently but of the sales are not improving then the ratio will not improve. The company should engage in promotions and try sell the finished goods quickly to improve this ratio.
• The assets which are not currently in use should be liquidated. Company should sell the unwanted assets to improve efficiency.
• The assets should not be used inefficiently. The company should make use of the assets efficiently and lease the assets instead of buying .
• Improving the collection of accounts receivables can improve sales , so the company should ficus on quick collection practices.
• Automating the order , billing and the inventory system can improve the turnover ratios as well.