1) Analysis of Financial Statements Ski Mountain Inc. demonstrates that they have carried a large amount of debt with low levels of cash and other liquid assets. This is told through the analysis of both the balance sheet and the income statement. The balance sheet shows that total liabilities have consistently exceeded total assets of the company. When determining the ability for this company to lend and repay its debts, important financial ratios were identified. The debt to equity, current ratio, quick ratio, and working capital ratio were analyzed, and each demonstrate the poor financial health of Ski. Overall, the company has low liquidity and high leverage. The company also demonstrates low solvency, as the assets are not greater than …show more content…
to have improving financial health over the four-year period. The company has been able to improve its cost efficiency and increase profitability with a constant revenue stream. Ski may have trouble in controlling its costs, as total operating expenses have increased from 2013 to 2014. However, the expenses are lower than in 2011 and 2012. Also, the interest income has been high each of the four years but has decreased in 2014. It is still relatively high compared to the interest income of $13,000 in the same year. This could demonstrate the company having a significant amount of debt. However, the ratios of gross profit, EBITDA, and net margin demonstrate a positive and healthy financial status. Overall, there is a high risk for Ski Mountain Inc. to default on its loan. The company has a high amount of debt compared to its assets, negative net worth, and has continually relied on debt to finance growth. While net operating profit and EBITDA have increased over the four-year period, there are still large amounts of interest expense present. 2) Strengths and Weaknesses of …show more content…
• Revenue has remained constant. • Gross profit has similarly stayed constant. • Operating expenses have decreased since 2011 but increased from 2013 to 2014. Net Profit has increased from negative amounts in 2011 and 2012 to positive amounts in 2013 and 2014. • Ski Mountain Inc. has been able to generate more profit than expenses incurred in 2013 and 2014. Interest expense has remained high in each of the four years but has decreased in 2014. • This is still large compared to the $13,000 of interest income in the same year. Gross Profit ratio is over 80% in each year, indicating a high percentage of revenue after accounting for the cost of sales. • Could also indicate the company is not investing enough in growth or having limited opportunities for expansion. EBITDA has increased steadily each year, with 1,718 in 2014. • Shows that the operating earnings are high compared to the debt. • Indicates a strong ability to generate cash from operations. Net Profit (margin) ratio has steadily increased from negative amounts in 2011 and 2012 to positive amounts in 2013 and 2014. • Company has avoided not being able to generate profit after all expenses have been
Which tells us even though revenue is down, values of assets are up. The dividend yield in the fall of last year was low compared to their
For example, Verizon has increasing number of common stock. It was $424,000. Also, retained earning increased about 27%. Cash flow Statement Net cash provided by operating activities during 2014 decreased by $8.2 billion because increase in adjustment to net income like increase in income tax payments and interest payments.
Liquidity Ratios……………………………………………….4 4.1.2. Gearing…………………………... ………………………….. 5 4.1.3. Profitability…………......………………………. ……………5 4.2
Sally’s Beauty Holding, Inc., who has a current ratio of 2.4, is quicker to turn their current asset into cash but also is not investing excess assets. Both companies are able to meet their debt obligations. On the other hand, Coty’s Inc. current liabilities exceeds their current assets revealing their current ratio to be .94. Having a ratio below one can imply that current assets are barely being covered by the current liabilities. Ulta Beauty’s debt-to-equity is estimated to be .65, which reveals Ulta Beauty to have a low risk and not using high amounts of debt to finance operations, because total liabilities is $1,001,660 and total shareholders’ equity is $1,550,218.
thus can be claimed that equity funds the company's assets. However, the data makes clear that as the ratio rises, debt levels increase as well. In other words, the business places itself at risk of default. 7. Gross Profit Margin
The ratio analysis (exhibit 7) demonstrated that the performance of the company has declined. The relative lower growth in the revenues and profit margin. For the external assessment, we analyze the income statement comparison chart (exhibit 7). It indicates that Dollar General still lead in the net sales but its growth in sales dropped approximately 43.3% and their peer's competitors had growth.
For the business to sustain and growth, it must continue to increase company’s profitability. Finding the right strategy to increase profit involves knowing which area of the financial are working and which needs improvement.
Introduction The financial health of an organization is a crucial determinant of its ability to sustain operations and grow. One such company, Science Construction PLC, grappled with financial difficulties, particularly insolvency, which hampered its operational efficiency and strategic planning (Erer, 2013). This paper investigates the company's financial distress, identifying the key problems and their root causes. The analysis aims to provide insights to help similar organizations anticipate, understand, and navigate such challenges.
Earnings reports showed a superfluous amount of funding across the board. Within a period of six months, their perfect financial situation began to decompose at a sharp rate. For the first time in over four years, the company reported a loss of
This means that a huge part of the company's assets is financed by debt. While this level of debt may increase the company's financial risk, it may also enable the company to finance growth opportunities and generate higher returns for shareholders (Délèze & Korkeamäki, 2018). In terms of the solvency position of the company, it is essential to observe that the Debt Ratio is just one of many financial ratios that should be considered. The solvency position of the company should be assessed based on a range of factors, including its ability to generate cash flow, its profitability, and the level of interest payments on its debt (Rugy & Salmon, 2022).
Nevertheless, its the financial performance of the company shows consistently strong compared to its competitors. The five year period analysis in financial performance of the company indicates that the company uses its assets effectively to optimise leverage and returns. Continuous investments in property, plant and equipment affected the overall results but it prepares the company to embrace the new landscape of innovating business in retailing. E-commerce was introduced.
Overall, the increased debt is justifiable as they are producing a lot more, but it does hinder their liquidity and ability to take on more debt. In 2015 the company had a gross margin at 30.8% which was higher than the industry. This is a good indication that the
(a) Analysis of financial statements is considered to be an effective tool for analyzing the operating and financial performance of an organization. The analysis of financial statements is useful for taking practical economic decisions by various users. There are different types of tools available for the analysis of the performance of an organization. However, the horizontal and vertical analysis is a very widely used technique for developing a better understanding of financial strengths and weakness of an organization. For the purpose of this assignment, as a Financial Analyst for Middle East Venture Capital LLC, I have chosen Oman Fisheries Co. S.A.O.G.
Custom Snowboards is considering borrowing a 5 year loan (long term loan) from a bank. It has been deemed necessary that the company presents a detailed analysis of its financial statements to reveal their credit worthiness so as to qualify for the loan. This report logically presents the analysis to this effect. The financial statements have several line items that could either support or discredit the company’s chances of being considered for the loan. These items/points are categorized into strengths (supportive) and weaknesses (non-supportive)
This study also shows the advantages and uses of these ratios in terms of financial decision making of an organization. Introduction Ratio analysis