MBA 501-Foundations(Section C)
Spring 2013 Term
Yuting Tina Chen
Professor Ronald Miolla
Financial Analysis: Lamar Swimwear
This report includes that the financial ratio analysis and the suggestion for Mr. Adkins. There are three parts in the financial analysis: liquidity analysis, asset management capability analysis and profitability analysis. At the end of this paper, the recommendations to Mr. Adkins about the investment of Lamar Swimwear are produced. Financial Ratio Analysis
Liquidity analysis. The meaning of a company's liquidity is that the cash ability and the stability. Analyzing the liquidity we can get if the enterprise can repay long-term debt and short-term debt with its assets. This is the key point that distinguish the company can develop health or not. The most important ratio we have to consider during the analysis of liquidity is Current Ratio and Quick Ratio (Thomsett, Michael C.2007). According to the data in the balance sheet of Lamar Swimwear, we can find the total current assets and the total current liabilities. Divide current assets by current liabilities, we can get the current ratios in 200X to 200Z, Table 1.
The higher the current ratio, the greater the liquidity of the corporate assets. The generally believed that the a reasonable minimum current ratio is 200%. According to the table 1, it shows us the current ratio both in 200Y and in 200Z are below 200%, and the current ratios are declined year by year. However, the selected industry ratios are rising year by year and greater than 200% in 200Y and 200Z. It implies that the Lamar Swimwear's debt paying ability is less than average and trending downward. Nonetheless, the liquidity analysis just with current ratio is limited, and the quick ratio make up for this limitation. Both current ratio and quick ratio are reflected the liquidity of the assets....