StudentShare solutions

# Comparison of ratios over a two-year period - Research Paper Example

## Extract of sampleComparison of ratios over a two-year period

Besides, financial ratio analysis can also be used to assess the performance of different departments and managers and how their overall performance may have an impact on the performance of the whole firm. Sparklin Automotive Company is in business since 1990 and is supplying different automotive related parts across the whole country. In order to better assess its performance for the year 2005 and 2006, a comprehensive ratio analysis is important. This will provide a critical insight into areas such as liquidity management, overall asset management, the nature and extent of firm’s debt as well as assessing the profitability during these two years. Ratio Analysis Explanation Ratio analysis is the process of calculation and comparing the ratios which have been extracted from the different financial statements. By forming the historical trends, ratio analysis can actually provide an insight into the performance as well as charm in the company to perform in the long run based on the historical data. Ratio analysis is also important from the perspective of assessing the performance of the managers and understanding as to how the organization is performing. By computing financial ratios, a firm not only compares its performance with the competitors but also get an insight into its own historical performance. Ratio analysis therefore can be used for two different purposes or in two different manners i.e. making comparisons through trend analysis and comparing the ratios with the competitors. When financial ratio analysis is used for the purpose of trend analysis, a firm or a manager can actually get an insight into how the trends in different ratios are pointing towards the performance of the firm. For example, if a manager wants to assess as to how the overall inventory has been managed through out the year, she can compute the inventory turnover ratio and days in inventory to get an insight into how the inventory of the firm has been maintained and how sales have been generated. Ratio analysis therefore provides an ability to perform objective analysis of the performance of the firm. (Bull, 2007) Ratio analysis can either be used by the firm for its own evaluation purposes so that managers can assess what is required to be done in order to improve different areas lacking in achieving the targets. Secondly, ratio analysis can also be used by the investors to not only assess the historical performance of the firm but based on this assessment make forecasts as to how the firm may perform in future. Ratio Calculation Ratio Formula 2005 2006 Current Ratio Current Assets /Current Liabilities 1.475:1 1.403:1 Debt to Equity Ratio Total Liabilities / Total Equity 0.449:0.551 0.440 : 0.56 Inventory Turnover Sales / Inventory 6.11 times 4.620 Times Receivables Turnover Sales / Receivables 18.24 times 18.16 times Gross Margin Gross Profit / Sales 49.19% 40.70% Evaluation of the Ratios Current Ratio Current ratio is one of the basic indicators for assessing the liquidity position of the firm and indicates as to whether the firm has the required liquid assets to pay off its immediate liabilities. A current ratio of higher than 1 is considered as acceptable because for ever \$1 of current liabilities firm has more than \$1 of current assets to settle these ...Show more

## Summary

Memo To: Supervisor From: Subject: Financial Ratio Analysis of SAC for year 2005 & 2006 _ Introduction Financial ratio analysis is considered as one of the most effective methods of analyzing the financial performance of any company…
Author : rbergstrom
Save Your Time for More Important Things
Let us write or edit the research paper on your topic
"Comparison of ratios over a two-year period"
with a personal 20% discount.
Grab the best paper

### Related Essays

Comparison of Two Art Pieces
The Berger educational Trust is dedicated to making a change in the history of art by ensuring that the students and other scholars of the art work get to be educated on the issues that pertain to art works. They also intend to ensure that the collection of educational materials and resources is accessible to all people for beneficial factors.
3 pages (750 words) Research Paper
Comparison Of Two Companies
Among the company’s leading brands are its Mercedes A, E and S classes all of which are prestigious and luxury cars used worldwide by dignitaries and leading business people. The company also manufactures Actros and Antos both of which are heavy commercial trucks.
3 pages (750 words) Research Paper
They become significant only when considered along with other figures. If we say the firm earns a profit of 10,000, it is meaningless unless the figure of capital employed to earn it is available. Financial ratios are calculated from one or more pieces of information from a company's financial statements.
5 pages (1250 words) Research Paper
Financial Performance of BAE Systems Plc
Cobham is more profitable than BAE and it generated more income from its investment capital than BAE. This is because Cobham has better control over its costs than BAE. Performance of a business is often demonstrated in the good quantitative results at the end of the fiscal year.
8 pages (2000 words) Research Paper
Financial Analysis of Tesco Supermarket
Sainsbury Plc. This report will start by giving a brief background of the two organizations in terms of their financial approaches. The analysis and benchmarking of their financial ratios will follow. This paper concludes with a recommendation for Tesco Plc to improve its liquidity.
10 pages (2500 words) Research Paper
Issues as a Nurse Manager: A Comparison of Two Case Studies
Various studies have examined and documented the different issues encountered by nurse managers in the nursing practice. These studies have exhibited that nurse managers often face problems related to nursing staff shortage. This paper shall use a minimally structured interview in order to gather information from primary respondents. Questions related to the primary functions of the nurse respondents shall be included in the questionnaire.
14 pages (3500 words) Research Paper
Finance research project
Later on, the same has been compared with its competitor Universal Corporation. Both the companies are listed on the New York Stock Exchange. Further a comparison of both the companies has been done with that the of the industry standards.
10 pages (2500 words) Research Paper
Internet makes ratio analysis for two Qatari Companies (Dlala and Qatar Telecom)
Through the comparison of their performance both nationwide and internationally, we will be able to access the conclusive assesses on their marketing trends. Dlala and Qatar telecom is the companies of our interests in the analysis of financial ratios.The
5 pages (1250 words) Research Paper
Comparison of Two Religions
Vedic religion is the earliest form of Hinduism, which scholars deduce to have existed under the preservation of the ancient literatures known as the Vedas. Hinduism has spread all over the
2 pages (500 words) Research Paper
Most current financial data and ratios for two firms in a single industry, from the US
With the increasing demand for fast food due to change in lifestyle fast food companies have focused on improving and increasing their services and customer base respectively. It is from the financial statement we can find out how efficient the
8 pages (2000 words) Research Paper
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger