Ratio Analysis Case - Speech or Presentation Example

Investors of the company regard it as a poor investment because it has poor current and future performance. They anticipate lower growth in the future. As far as the well-being of the common stockholders are concerned, the company is able to provide them some returns in the form of dividends even though it might be lower than that of other companies in the industry. Stephens Company has a higher gross margin percentage implying reasonable profit as the company is keeping overhead costs in control.

In terms of liquidity, the firm is relatively liquid. Its current ratio is greater than one meaning it is able to meet its near-term obligations with lots of ease. Its quick ratio is less than one implying that it is unable to meet its short-term using its most liquid assets. The company is less liquid than other companies in the industry because it has lower quick and current ratios. In terms of efficiency, the company is less efficient in managing its liabilities and using its assets to generate income.

Its average collection and sales period are more than that of other companies in the industry. The company’s efficiency in collecting its receivable is less than that of the industry. Additionally, the company has higher days’ inventory on hand. In terms of leverage, the company uses more debt than equity. It has a debt to equity ratio of 2. It is highly leveraged than other companies. Even, though it is highly leveraged, it has more cover for the interest expense (TIE=3.08 times), but the cover is less than that of other companies in the industry.

In general, the company is able to pay both the long-term and short-term debts. The loan should be approved. First the company makes a reasonable profit which is sufficient enough for its daily operations. Secondly, the company has higher cover the for the interest expense implying lower risk as a result of bankruptcy. Finally, the company is able to provide common