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Constructing Pro-Forma Statements (Heartland Express)
Finance & Accounting
Pages 10 (2510 words)
The company under consideration is Heartland Express, a renowned name and a considered leader in the United States when it comes to transportation and logistics. Heartland Express has been in business for quite a long time, delivering exceptional services to its customers and enabling the companies to improve their support their logistics infrastructure.
The liquidity ratio measures the company’s ability to pay its short-term liabilities. The ratio illustrates that how quickly a company can convert its assets into cash and cash equivalent in order to pay off its short-term liabilities. The most commonly used liquidity ratio, the current ratio, which is calculated by comparing the current assets and current liabilities. The strengthened the current ratio the more ability the company has to pay its debts and short-term obligations over the next 12 months. An overall analysis of the ratio would portray that in all the years the company had enough assets to pay off its obligations and debts. In the financial year 2007, the current ratio decreases from 3.35 to 2.91 due to the decrease in the current assets of the company by a staggering 32% which majorly pertains to the decrease in the short term investment from 322 million to 186 million. The cause of the decrease in the current ratio for the financial year 2008 also pertains to the massive decrease in the short term investment. The reason for this decline is during that particular period, the equity shares market was going through its worst time. The companies rather than recording losses on market to market of these securities started selling these securities in the stock market. The acid test, which is also regarded as the quick ratio, is calculated by subtracting the inventory balance from the total current assert balance. Out of the current assets mentioned, inventories are regarded as the one which takes comparatively more time to be converted into cash or cash equivalent. The acid test ratio has followed the same trend as the current ratio. ...
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