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Acc 291 Week 5 Memo

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Acc 291 Week 5 Memo
Memo
To: Huffman Trucking CEO
From:
Date: September 3, 2002
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Re: Ratio Analysis Findings
Ratios are used to analyze financial statements to determine their profitability, liduidity and solvency. Liquidity Ratios are used by suppliers and short-term creditors such as bankers to measure the ability of an organization to pay its maturing short-term financial obligation. This is also used to determine whether the organization will be able to meet any unexpected financial need for cash.
Profitability ratios are used by creditors and investors to evaluate the earning power of an organization. Profitability is used to measure the operation success of an organization for any given time period. Solvency ratios are used by investors, stakeholders and financial analyst to determine whether an organization will be able to survive over a long period of time.
The Huffman trucking liquidity ratios reveals that in the year 2011 the current assets are greater by approximately two thousand dollars and the current liabilities are greater in the year 2011 as well. The quick ratio reveals that the Huffman Trucking Company has more cash and accounts receivables than the current liabilities. When comparing the year 2011 with the year 2010 the quick ratio shows an approximately one thousand dollar difference with the year 2011 being greater. The receivable turnover reveals that Huffman Trucking had an increase in Net Credit Sales of approximately one thousand dollars. The average net receivables decreased from the year 2010 to 2011 approximately thirty thousand dollars. The Profitability Ratios: The asset turnover is greater in the year 2011 by two thousand dollars. The average assets stayed the same making the asset turnover ratio greater in the year 2011. The receivables Turnover revealed the same in the years of 2010 and 2011 leaving the average being the same. The profit margin reveals that Huffman Trucking’s net



References: Weygandt, J. J., Kimmel, P. .., & Kieso, D. E. (2010). Financial Accounting (7th ed.). Hoboken, NJ: John Wiley & Sons.

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