Question

Based on the information given, what assumptions can you make about this company?

Liquidity and Efficiency:

Current Ratio: Current Assets/Current Liabilities

129,095/352,928 = 0.37:1

Total Asset Turnover: Net Sales/Average Total Assets

3,545,794/(1,902,637 + 1,833,301/2); 3,545,794/1,867,969 = 1.9

Inventory turnover: Cost of Goods Sold/Average Inventory

2,301,181/(338,590 + 330,223/2); 2,301,181/334,407 = 6.9 times

Solvency:

Debt Ratio: total liabilities/Total Assets

589,553/1,313,084 =0.45

Debt to Equity Ratio: total Liabilities/Stockholders Equity

589,553/1,313,084 = 0.45

Equity Ratio: Total Stockholders Equity/Total Assets

1,313,084/1902,637 = 0.69

Profitability:

Profit Margin: net income/net sales

218,120/3,545,794 = 6.2%

Return on total assets: Net Income/Average Total Assets

218,120/(1,902,637 + 1,833,301/2); 218,120/1,867,969 = 11.7%

Return on Common Stockholders’ Equity: Net Income/Shareholders’ Equity

218120/(1,313,084 + 1,137,227/2); 218,120/1,225,156 = 17.8%

Market Prospect:

Price-Earnings Ratio: market-price per common share/Earnings per share

35.88-1.87 =19.19 times

Horizontal Analysis
Year Ended	2017	2016	Dollar Change	Percent Change
Current Assets
Cash and cash equivalents	$248,140	$265,276	$(17,136)	-6.50%
Marketable securities	$111,067	$61,061	$50,006	81.9%
Accounts receivable	$54,505	$75,723	$(21,218)	-28.0%
Inventory	$338,590	$330,223	$8,367	2.5%
Prepaid Expenses	$129,095	$102,078	$27,017	26.5%
Total	$881,397	$834,361	$47,036	76.4%

Trend Analysis
Year Ending	2017	2016	2015	2014
Current Assets
Cash and cash equivalents	102.50%	109.60%	63.90%	100.00%
Marketable securities	39.4%	21.7%	37.0%	100.00%
Accounts receivable	98.8%	137.3%	127.7%	100.00%
Inventory	108.8%	106.1%	115.1%	100.00%
Prepaid Expenses	170.0%	134.4%	135.4%	100.00%
Total	519.5%	509.1%	479.1%	100.00%

Common-Size Analysis
Year Ended	2017	2016
Current Assets
Cash and cash equivalents	13.0%	14.5%
Marketable securities	5.8%	3.3%
Accounts receivable	2.9%	4.1%
Inventory	17.8%	18.0%
Prepaid Expenses	6.8%	5.6%
Total	46.3%	45.5%

Answer 1

- Current Ratio ideal Ratio is 2. In this scenario , its 0.37: 1, Its not healthy for an organisation. Current Liabilties are more than Current Assets. It means, They don't have enough assets to cover liabilities.

- Total Asset Turnover: its a ratio to measure " how well a company uses its assets to generate sales. Higher the ratio is an indicator that Assets are being utilized well to generate sales. There is no specific standard indicator for Total Asset turnover Ratio

- This Organisation has a strong Inventory Turnover Ratio of 6.2, it means it has a strong sales over its competitor. Company is profitable.

- Solvency:

Debt ratio: or Debt to Total Assets Ratio: It has a ratio of 0.45 which means it has a lower ratio and its in a better position for creditors because the company has enough assets to cover long term debt obligations.

Debt Equity Ratio: Lower the ratio of Debt equity, Its really good for the organisation since it avoids bankruptcy and liquidation. Sine its 0.45, Organisation isn't dependent on debts.

Shareholders Ratio:  It tells the amount of assets that shareholders has a claim . During Liquidation Assets will be sold and given to the sharholders after settling all the liabilities This company has a low Shareholders Ratio of 0.69 and shareholders claim is less than the assets held.

Profitability

All the profitability ratios should be compared with the previous year There is no standard Ratio to measure a profitability ratio. Higher the ratio is better for the company because its an indication that the company is doing really well in terms of profits.

Price Earnings Ratio:

we see a high Price Earnings Ratio . Investors consider the PE Ratio when choosing an acceptable investment. PE ratios vary by industry. Managers like to see high P/E Ratios because it indicates strong market confidence.

Overall This is a profitablity organisation except that short term assets are not enough to cover short term liabilities but this organisation can cover long term liabilities . The shares of this company will be attractable for investors since they have a high PE Ratio .