Question

S&C Corp. recently completed its 2019 operations. The company’s financial ratios are as follows.

								2019	2018
Current ratio								2:1 times	1.8:1 times
Accounts receivable turnover								22 times	12 times
Profit margin (Net profit margin)								23%	15%
Inventory turnover								12 times	19 times
Times interest earned								4 times	8 times
Total assets turnover								0.7 times	1.20 times
Acid-test ratio								0.8:1 times	1.3:1 times
Debt ratio								60%	30%

Required:

Comment on the financial performance of S&A Corp

Just need some comments

Answer 1

Current Ration Improved in 2019 means company is able to manage there short term assets well comapre to short term liablities, against every 1 Dollar libalities they have 2 dollar of assets.

Accounts Receviable higher in 2019 vs 2018 means company is able to collect faster credit sales than prior year which is good sign for cash flow improvment and working capital.

Profit margin gone up increase in operating income will help reinvesting or ditribute to the shareholders.

Inventory turnover is slow down in 2019 vs 2018 means company demand of the products is low and reducing sales over times.

Time interest eanred is also down means company has lower capability to pay its interest on loans than in prior year which is not good sign for any company.

Total asset turnover down means company is not utlizing its asset effectively compare to last year where it turned sales higher with effective utilization of its assets.

Acid test ratio is lower than 1 is always bad as it denotes company has lesser liquid assets to mitigate its current obligations.

Higher debts ratio is not a good indicator for a company as its tie interest ratio is also lower company in future may not able to cover its interest if this continue.