Ratio Analysis Memo
Ratio Analysis Memo
Memorandum
TO: Chief Executive Officer
FROM: Accounting Department
DATE: July 23, 2015
RE: Financial Statement Analysis and Findings 2008
The following memo will explain the findings of the financial statement analysis for 2008 for Berry’s Bug Blasters as well as offer advice significant decreases in profits or increases in liabilities if they apply. Some quick facts:
Liquidity is up for 2008
Current ratio shows we pay assets 5.99 times for every current liability, an increase of 62% from 2007
Significant liquidity ratio decrease in 2008 was in inventory turnover
Inventory tuning over 6.67 times per year, down 42% from 2007
Berry’s Bug Blasters inventory turnover is affecting the profits. The profitability ratios decreased with the stockholders’ equity decreasing the most by 56%. The interest expense for 2007 and 2008 has been eliminated. Berry’s Bug Blasters total debt was decreased to assets by 24% in 2007 to 16%, the company’s number now shows solvency. In order to determine if a company will meet short term debt obligations liquid ratios are used by businesses and investors. Berry’s Bug Blasters has proven short term obligations 5.99 times to 1 liability.
At the point when an owner or investor evaluates an organization 's liquidity ratios, they are utilizing data from the Balance Sheet to evaluate if an organization has the assets and the ability to pay off short term liabilities. Berry’s Bug Blasters have met the mark.
Stakeholders use profitability ratios to pick up understanding on the adequacy or sufficiency of an organization 's profits. Loaning organizations and investors will utilize profitability ratios to help focus the conceivable financial related profits for the investment into that particular organization.
Administration inside of an organization can use profitability ratios to issue territories inside of the organization and make any vital enhancements to enhance execution in those areas. The accompanying attachments will
Memorandum
TO: Chief Executive Officer
FROM: Accounting Department
DATE: July 23, 2015
RE: Financial Statement Analysis and Findings 2008
The following memo will explain the findings of the financial statement analysis for 2008 for Berry’s Bug Blasters as well as offer advice significant decreases in profits or increases in liabilities if they apply. Some quick facts:
Liquidity is up for 2008
Current ratio shows we pay assets 5.99 times for every current liability, an increase of 62% from 2007
Significant liquidity ratio decrease in 2008 was in inventory turnover
Inventory tuning over 6.67 times per year, down 42% from 2007
Berry’s Bug Blasters inventory turnover is affecting the profits. The profitability ratios decreased with the stockholders’ equity decreasing the most by 56%. The interest expense for 2007 and 2008 has been eliminated. Berry’s Bug Blasters total debt was decreased to assets by 24% in 2007 to 16%, the company’s number now shows solvency. In order to determine if a company will meet short term debt obligations liquid ratios are used by businesses and investors. Berry’s Bug Blasters has proven short term obligations 5.99 times to 1 liability.
At the point when an owner or investor evaluates an organization 's liquidity ratios, they are utilizing data from the Balance Sheet to evaluate if an organization has the assets and the ability to pay off short term liabilities. Berry’s Bug Blasters have met the mark.
Stakeholders use profitability ratios to pick up understanding on the adequacy or sufficiency of an organization 's profits. Loaning organizations and investors will utilize profitability ratios to help focus the conceivable financial related profits for the investment into that particular organization.
Administration inside of an organization can use profitability ratios to issue territories inside of the organization and make any vital enhancements to enhance execution in those areas. The accompanying attachments will
References: Weygandt, J.J., Kimmel, P.D., & Kieso, D.E. (2010). Financial Accounting (7th ed.). Hoboken, NJ: John Wiley & Sons. Apollo Group Virtual Organization. (2011). Berry 's Bug Blasters. Retrieved from:https://ecampus.phoenix.edu/secure/aapd/CIST/VOP/Business/Berrys/index.asp on July 24, 2015.