Memorandum Ratio Analysis Essay Example
LEARNING TEAM RATIO ANALYSIS - WEEK 5
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Learning Team Ratio Analysis - Week 5 ACC/291 June 18, 2013
LEARNING TEAM RATIO ANALYSIS - WEEK 5
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TO FROM DATE RE
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CEO, Riordan Manufacturing Team A June 18, 2013 Organization Financial Analysis
The purpose of this memorandum is to provide organization’s financial analysis by identifying our position and performance as well as to assess Riordan Manufacturing’s future financial performance. Our team has evaluated the three broad areas of profitability, risk and source and uses of funds. The liquidity ratios are the following: the current ratio is 4.72 which mean that for every dollar in current liabilities, there is a $4.72 dollars in current assets. Compared with the 2010’s current ratio which it was 5.28, it has decreased by 0.56. Acid test ratio for 2011 is 1.90; meaning immediate liquidity using short-term assets that is composed of cash, short-term investments, and receivables to cover its immediate liabilities without selling inventory (Investopedia, 2013) is for one dollar in current liabilities, there is 1.90 in short-term assets. Compared with 2010’s acid test ratio which it was 2.00, there is an increase of .10. Corporation’s 2011 receivable turnover ratio is 22.6, better than the year prior which it was a 21.2. This ratio measures the number of times the company collects receivables during an interval of time (higher the ratio, higher the company’s efficiency in collecting receivables). For 2011, the company collected receivables every 16 days, better than 2010 when the company was collecting every 17 days. The corporation’s inventory turnover ratio for 2011 is 5.7 which is 0.1 greater than 2010. This ratio means that the corporation’s inventory was sold every 64 days in 2011 and every 65 days in 2010. Company’s profit ratios are the following: Its assets turnover ratio, which measures the company’s efficiency by using its assets to generate sales, is 1.62 in 2011 and 1.66 in 2010
1
Learning Team Ratio Analysis - Week 5 ACC/291 June 18, 2013
LEARNING TEAM RATIO ANALYSIS - WEEK 5
2
TO FROM DATE RE
: : : :
CEO, Riordan Manufacturing Team A June 18, 2013 Organization Financial Analysis
The purpose of this memorandum is to provide organization’s financial analysis by identifying our position and performance as well as to assess Riordan Manufacturing’s future financial performance. Our team has evaluated the three broad areas of profitability, risk and source and uses of funds. The liquidity ratios are the following: the current ratio is 4.72 which mean that for every dollar in current liabilities, there is a $4.72 dollars in current assets. Compared with the 2010’s current ratio which it was 5.28, it has decreased by 0.56. Acid test ratio for 2011 is 1.90; meaning immediate liquidity using short-term assets that is composed of cash, short-term investments, and receivables to cover its immediate liabilities without selling inventory (Investopedia, 2013) is for one dollar in current liabilities, there is 1.90 in short-term assets. Compared with 2010’s acid test ratio which it was 2.00, there is an increase of .10. Corporation’s 2011 receivable turnover ratio is 22.6, better than the year prior which it was a 21.2. This ratio measures the number of times the company collects receivables during an interval of time (higher the ratio, higher the company’s efficiency in collecting receivables). For 2011, the company collected receivables every 16 days, better than 2010 when the company was collecting every 17 days. The corporation’s inventory turnover ratio for 2011 is 5.7 which is 0.1 greater than 2010. This ratio means that the corporation’s inventory was sold every 64 days in 2011 and every 65 days in 2010. Company’s profit ratios are the following: Its assets turnover ratio, which measures the company’s efficiency by using its assets to generate sales, is 1.62 in 2011 and 1.66 in 2010