Ratio Analysis Memo (Riordan Manufacturing)

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LTD Ratio Analysis Memo
ACC 291

Memorandum
Monday, March 4th, 2013
To: CEO, Riordan Manufacturing Inc.
From: Financial Analyst LTD

Listed below you will find a quick analysis of the company using productivity, Liquidity and solvency ratios. This analysis is accompanied by vertical and horizontal analysis. These analysis gives anyone inquiring a good picture of the company’s overall performance. This analysis is also a good way to determine the company’s financial standings for the said years.
According to the analysis in the year 2004, Riordan’s current ratio was 2.429 and in 2005 the current ratio improved to 2.087. The decrease in this ratio gives anyone inquiring a clear picture of how financially stable the company was in 2004 and 2005. It is also good information for anyone planning to invest in Riordan.

Riordan manufacturing has developed as a producer of plastics as well as foam-based products. It is without a doubt that this success has come from the consistency that the company has been representing over the last two years. Through the audit and review Riordan Manufacturing has been very consistent from fiscal year 2004 to fiscal year 2005. The greatest of these consistencies would have to be accounts receivable that grew by 7.2%. Many outside entities that range from potential stockholders to creditors for future endeavors will view these numbers.

Riordan Manufacturing did maintain the same amount of current assets between both of the reviewed years. The current assets are a worthy representation of the company’s ability to keep and maintain profits. The stockholders will mostly be interested in this line as it is a respectable judge for the potential for growth of the company.

Another area that the company had a slight growth in is the total assets for the company. Riordan had growth in their total assets by just over 2%. An abundant amount of this growth was because the company’s investment in tangible assets such as equipment and manufacturing plants. The growth in the total asset line does a great job of improving liquidity of the company. With a higher amount of liquidity the company can show that if worse comes to worst they can pay the bills. This line will interest creditors, in addition to the growth in this category so that they can have confidence that they will receive their capital back.

Riordan manufacturing has proven that they have had consistent growth through the years, so long as they continue to work on keeping their total liabilities to a minimum for the stockholders while continuing to grow total assets for the company.

LTD Ratio Analysis Memo

Riordan Manufacturing
Liquidity Ratios:
* Current Ratio
Current Assets ÷ Current Liabilities

2005
$14,555,092
$6,974,094
=2.09

2004
$14,643,456
$6,029,696
= 2.43

* Quick Ratio
(Cash + Accounts Receivable) ÷ Current Liabilities

2005
($305,563+$6,062,838)
$5,836,032
$6,368,401
$5,836,032
=1.09

2004
$357,216+$5,657,216
$6,029,696
$5,914,432
$6,029,696
=0.98

* Receivables Turnover
Net Revenue ÷ Average Accounts Receivable

2005
$50,823,685
($6,062,838+$5,657,216)
2
$50,823,685
$5,860,027
= 8.67

2004
$46,044,288
($6,556,160+$5,657,216)
2
$46,044,288
$6,106,688
=7.53

* Inventory Turnover
Cost of Goods Sold ÷ Average Inventory

2005
$42,044,288
($6,556,160+$5,657,216)
2
$42,044,288
$6,106,688
= 5.35

2004
$37.480,050
($8,074,880+$7,854,112)
2
$37,480,050
$7,964,496
= 4.71

Profitability Ratios
* Asset turnover
Total Revenue ÷ Total Assets
($35,637,504 Beginning 2004)
2005
$50,823,685
($33,856,256+$34,592,182)
2
$50,823,685
$68,448,438
2
$50,823,685
$34,224,219
=1.49 Times

2004
$46,044,288
($35,637,504+$33,856,256)
2
$50,823,685
$69,493,760
2
$46,044,288
$34,746,880
=1.33 Times
*
* Profit...
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