On the surface, Riordan Manufacturing's balance sheet reveals a profitable company with an excellent equity for its stockholders. However, an in-depth analysis reveals some possible concerns with its long term financial health. Over the past three years, Riordan has been relatively stagnant despite consistent investment in a joint venture in the People's Republic of China. In addition, the company continues to carry a significant long term debt without a noticeable attempt to lessen that debt.
Riordan also exhibits possible concerns with its accounts receivables and inventory levels. The company has a receivable turn of 8.67, meaning that it takes and average of 42 days for its customer to pay on its bills. While this falls slightly higher than the industry average of 7.2, it falls far short of the industry leader with a turn rate of 13.12 (Reuters). Perhaps of more concern is the company's inventory turnover rate. Riordan Manufacturing holds a significant amount of inventory on hand, turning it over approximately every 68.2 days or a ration of 5.32. The industry standard for injection molding is 11.86 or approximately every 30 days (Reuters).
Finally an analysis of the company's liquidity reveals some good news. Based upon its Current Ratio of 2.08 and its Quick Ratio of 1.21, Riordan Manufacturing has sufficient ability to convert its assets to cash in order to pay for current and unforeseen expenses in the future.
Overall, Riordan Manufacturing is an below average company with reasonable stability for the future.
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