Ratio analysis - Coursework Example

Financial Ratios Analysis Recommendation Debt to income ratio compares the amount owed to that earned. Debt management requires that in case of a lower ratio, more savings should be done. An increasing debt to equity ratio means that the company is being financed more by creditors’ more than internal cash flow. This is not healthy, and a firm should stick to its affordable growth rate tied to its assets. An increasing interest coverage ratio means that the company is gearing sufficient funds from its operations.

This implies that the company does not have to use the cash at hand to make up for any difference or need to outsource funds. Assets turnover ratio measures the amount of revenue generated from assets owned by the company. A decreasing trend because of reducing sales implies that promotions and advertising of sales must be done (Gibson and Gibson 187). ConclusionThe debt to income ratio measures the level of total income to that of total assets of the company. The company’s increasing ratio of 0.

01% means that the both assets and sales are on the rise. Debt to equity ratio increases in the current year which means a lesser risk to the potential shareholders of the company. The investment potential of the company is safer for the likely investors. Competitors in the same industry are competing fairly with the company. The higher the higher the interest cover means improved ability of the company to pay its obligations. The company has enough chance to bear the amount of its prevailing finance cost.

From its assets turnover ratio, the company is not optimizing the use of its assets. The company cannot generate more sales with any fewer assets. Decreasing asset turnover ratio means a negative impact on the return on equity (Gibson and Gibson 187).Work CitedGibson, Charles H, and Charles H Gibson. Financial Reporting And Analysis. Cincinnati, Ohio: South-Western College Pub., 2001. Print.