It Calculate Financial Ratios
BSA/500
Calculate Financial Ratios
Riordan Manufacturing’s Calculated Financial Ratio
Current Ratio
The current ratio is the measure of the degree to which current assets cover current liabilities. A ratio of more than one suggests that it can pay most of its debts at that point in time. The ability to effectively turn products into cash is a good sign of a company 's financial state.
Current assets $14,589,092.09 * $14,643,456.43 *
Current liabilities $6,974,094 $6,029,696
Current assets are divided by current liabilities to determine the current ratio. Riordan 's current ratio is 2.10, and this suggests that the company is efficient in operating its business cycle. The industry ratio is 2.98. Riordan’s current ratio is above industry average, which means that Riordan is able to meet short-term obligations or satisfy short-term creditors.
Debt Ratio
The debt ratio reveals the extent to which a company is financed with debt. Creditors look at this ratio when they are trying to decide what the chances are that the company will not be able to make good on the business loans and obligations. A healthy company has a good balance between assets provided through debt and assets provided by the company 's owners.
Total liabilities $12,476,927 36.07% $12,160,256 35.91%
Total assets $34,592,182 $33,856,256
The debt ratio is calculated by dividing total liabilities by total assets. Debt ratio measures a firm 's total assets that are financed with creditors ' funds. It includes all short-term liabilities and long-term borrowings. In order to determine if RMI has borrowed too much we will calculate their debt ratio. The Debt to Equity Ratio measures how much money a company can safely be able to borrow over long periods of time. The normal level of debt to equity depends on economic factors, but a debt to equity ratio of over 40% should be a red flag to look closer for liquidity problems (Lermack, 2003). RMI’s debt ratio is at a healthy ratio
Calculate Financial Ratios
Riordan Manufacturing’s Calculated Financial Ratio
Current Ratio
The current ratio is the measure of the degree to which current assets cover current liabilities. A ratio of more than one suggests that it can pay most of its debts at that point in time. The ability to effectively turn products into cash is a good sign of a company 's financial state.
Current assets $14,589,092.09 * $14,643,456.43 *
Current liabilities $6,974,094 $6,029,696
Current assets are divided by current liabilities to determine the current ratio. Riordan 's current ratio is 2.10, and this suggests that the company is efficient in operating its business cycle. The industry ratio is 2.98. Riordan’s current ratio is above industry average, which means that Riordan is able to meet short-term obligations or satisfy short-term creditors.
Debt Ratio
The debt ratio reveals the extent to which a company is financed with debt. Creditors look at this ratio when they are trying to decide what the chances are that the company will not be able to make good on the business loans and obligations. A healthy company has a good balance between assets provided through debt and assets provided by the company 's owners.
Total liabilities $12,476,927 36.07% $12,160,256 35.91%
Total assets $34,592,182 $33,856,256
The debt ratio is calculated by dividing total liabilities by total assets. Debt ratio measures a firm 's total assets that are financed with creditors ' funds. It includes all short-term liabilities and long-term borrowings. In order to determine if RMI has borrowed too much we will calculate their debt ratio. The Debt to Equity Ratio measures how much money a company can safely be able to borrow over long periods of time. The normal level of debt to equity depends on economic factors, but a debt to equity ratio of over 40% should be a red flag to look closer for liquidity problems (Lermack, 2003). RMI’s debt ratio is at a healthy ratio
References: University of Phoenix. (2005). Balance Sheet. Retrieved September 3, 2008, from University of Phoenix, Virtual Organizations, rEsource University of Phoenix. (2005). Income Statement. Retrieved September 3, 2008, from University of Phoenix, Virtual Organizations, rEsource University of Phoenix. (2005). Budgets. Retrieved September 3, 2008, from University of Phoenix, Virtual Organization, rEsource