Abington Hill Toys Essay
Finance 301
September 15, 2011
CASE 1 ABINGTON-HILL TOYS, INC. INTRODUCTION
In the case of Abington-Hill Toys, Inc., Vernon Albright assumed the position of the president of the firm following the death of the Lewis Hill, the last of the original founders. During the last years of Mr. Hill’s control of the firm, the financial condition of the company had deteriorated.
In order to investigate the financial condition of the firm, the new president hired a company comptroller who was experienced in budgetary procedures. The previous comptroller duties had been handled by Mr. Hill with the assistance of the company’s former chief accountant, Jerald Cohen. As a result of poor prior management and incompetence, the firm was unable …show more content…
The current ratio liquidity result of .9665 indicates the firm may have difficulty meeting its current obligations to debt holders.
The acid-test ratio analysis result of .4482 indicated weakness in the firm’s ability to use its quick assets to retire its current liabilities.
The Inventory Turnover Analysis for the firm slightly exceeded the industry ratio, referencing the possibility that the firm may have inadequate inventory levels.
The Fixed Asset Turnover ratio of 1.34 was less than the industry average. The ratio suggests that the firm may be over-invested in plant, equipment and other fixed assets.
The Total Asset Turnover ratio of 1.00 indicated the firm may be weak with regards to selling their inventory fast enough, which in turn punishes the company’s sales.
The Debt ratio analysis of the firm was .4083. This elevated statistic associates the firm with a greater borrowing …show more content…
The Net Profit Margin of .0504 demonstrated that the firm has difficulty converting sales to profits less the expenses. The efficiency of the company is suspect.
The Return on Total Assets ratio of .0504 indicated that firm has a weak ability in getting its assets to generate revenue.
The Return on Net Worth ratio of .3024 shows the company does have the ability to grow quickly.
The final Z-Score ratio analysis of 1.775 indicated the firm was highly likely to enter bankruptcy within two years.
The financial analysis of this firm is a negative outlook. I would advise against lending money to Abington-Hill Toys, Inc.
SUMMARIZE
After reviewing the financial condition of the firm, it is evident that the firm has been under horrible management over the previous years, and is not worth direct investment. The firm does have the ability to generate growth as evidenced by the return on total assets ratio. However, the firm’s ability to grow is overshadowed by the debt risk the firm is burdened
September 15, 2011
CASE 1 ABINGTON-HILL TOYS, INC. INTRODUCTION
In the case of Abington-Hill Toys, Inc., Vernon Albright assumed the position of the president of the firm following the death of the Lewis Hill, the last of the original founders. During the last years of Mr. Hill’s control of the firm, the financial condition of the company had deteriorated.
In order to investigate the financial condition of the firm, the new president hired a company comptroller who was experienced in budgetary procedures. The previous comptroller duties had been handled by Mr. Hill with the assistance of the company’s former chief accountant, Jerald Cohen. As a result of poor prior management and incompetence, the firm was unable …show more content…
The current ratio liquidity result of .9665 indicates the firm may have difficulty meeting its current obligations to debt holders.
The acid-test ratio analysis result of .4482 indicated weakness in the firm’s ability to use its quick assets to retire its current liabilities.
The Inventory Turnover Analysis for the firm slightly exceeded the industry ratio, referencing the possibility that the firm may have inadequate inventory levels.
The Fixed Asset Turnover ratio of 1.34 was less than the industry average. The ratio suggests that the firm may be over-invested in plant, equipment and other fixed assets.
The Total Asset Turnover ratio of 1.00 indicated the firm may be weak with regards to selling their inventory fast enough, which in turn punishes the company’s sales.
The Debt ratio analysis of the firm was .4083. This elevated statistic associates the firm with a greater borrowing …show more content…
The Net Profit Margin of .0504 demonstrated that the firm has difficulty converting sales to profits less the expenses. The efficiency of the company is suspect.
The Return on Total Assets ratio of .0504 indicated that firm has a weak ability in getting its assets to generate revenue.
The Return on Net Worth ratio of .3024 shows the company does have the ability to grow quickly.
The final Z-Score ratio analysis of 1.775 indicated the firm was highly likely to enter bankruptcy within two years.
The financial analysis of this firm is a negative outlook. I would advise against lending money to Abington-Hill Toys, Inc.
SUMMARIZE
After reviewing the financial condition of the firm, it is evident that the firm has been under horrible management over the previous years, and is not worth direct investment. The firm does have the ability to generate growth as evidenced by the return on total assets ratio. However, the firm’s ability to grow is overshadowed by the debt risk the firm is burdened