Ratio Analysis Memo Essay

The liquidity, cyberspaceability, and solvency balances get word some interesting points about Kudler Fine Foods fiscal position. The liquidity ratios revealed that during 2002 and 2003, Kudler was having no trouble paying short-term debt. However, the current and acid-test (quick) ratios demonstrateed that during 2003 Kudler had an dissipation amount of cash that they were non investing properly. These ratios also showed that Kudler was collecting receivables and change modal(a) inventory very quickly. The profitability ratios revealed that during 2002 and 2003, Kudler was using summations efficiently and make a decent profit. The profit bank ratio showed that during 2002 Kudler made a profit of four cents per dollar, and during 2003 they made a profit of roughly vi cents per dollar. In addition, the return on assets ratio (which is also a profitability ratio) showed that Kudler utilized their assets efficiently enough to turn a profit. The solvency ratio used, which was the debt to agree assets ratio, showed that during 2002 and 2003 Kudler only had around a quarter of their assets financed in debt. All of these ratios show that Kudler was a fairly intemperate corporation mo nettaryly during 2002 and 2003. When trying to realize out how successful Kudler Fine Foods is, it is critical to review all pecuniary statements. By using the horizontal and vertical analysis and the determining ratio calculations the profitability, liquidity, and solvency argon figured. A specific ratio analysis may becharm a particular customer. Lenders or suppliers would be interested in the liquidity ratio because the companys analogouslihood to pay off short-term debt is obvious.The profit of the company determines the potential impending success and would be of import to creditors and investors. The solvency ratios show if the company go out continue to grow and stockholders or financial analysts would be interestedin these ratios. Asset perturbation is th e amount of sales or revenues produced per dollar of assets. The Asset Turnover ratio is a work out of the productivity in which a company is using its assets. The number of time is calculated by the net sales change integrity by the average assets. Usually, the senior higher the ratio, the better it is, since it implies the company is generating to a greater extent revenues per dollar of assets (Investopedia, 2014). The asset turnover ratio tends to be higher for companies in a sector like consumer staples, which has a relatively small asset base hardly high sales volume. On the other hand, companies in areas like utilities and broadcastings, which have large(p) asset bases, will have cut back asset turnover. Kudler Fine Foods asset turnover ratio shows that from 2002 to 2003 there was not much of an increase. However, the percent does mend at a .3% increase from year to year. A profit permissiveness is a ratio of profitability calculated as net income divided by revenu es, or net profits divided by sales (Investopedia, 2014). It measures how much out of every dollar of sales a company actually keeps in earnings. net income margin is valuable when reviewing companies in like trades. A higher profit margin shows a more productive company that has a healthier govern over its costs compared to its competition. Profit margin is shown as a percentage. Therefore, for instance, a 20% profit margin means the company has a net income of $0.20 for each dollar of sales. facial expression at the earnings of a company does not always cause the whole story. Increased earnings are noble, but an increase does not mean that the profit margin of a business is getting better. For example, if a corporation has costs that have gotten larger faster than sales, it indicates a lower profit margin. This leads to the fact that costs need to be policed better. Kudler Fine Foods has a net income of $465,573 from sales of $11,698,828, giving it a profit margin of 4.0% ($465 ,573/$11,698,828). The nigh year net income rises to $676,795 on sales of $10,796,200, the companys profit margin raise to 6.3%. So while the company increased its net income, it has done so with diminishing profit margins.This is said because the return on assets ratio is low. When it is low the company uses less money on more investment. The profit margin is low as well calculated at only .6% showing that Kudler Foods had a low profit at that report time. The debt to total assets ratio was .28%, which showed the company is healthy. The times interest earned ratio was9.8%, which backs up claims of financial health. The solvency ratio shows Kudler Foods can pay back long obligations. Each ratio has different users interest in mind. produce on common stockholders equity is defined as nett Income / Total Capital, and Return on popular Stockholders Equity 676,795 / 1,928,960 = 35.09% Return. Here is a comparison of this (2003) information to the same information from last years ( 2002) records to lay out to determine a trend. Profit strand (2002), $647,645 / $10,644,800 = 6.08 % security deposit Return on Assets (2002), $2,675,250 / $10,796,200 = 24.78% Return Asset Turnover (2002) $10,644,800 / $2,271,400 = 4.69 propagation Return on Common Stockholders Equity (2002) $647,645 / $1,928,960 = 33.58% Return 2002 Year 2003 Year Profit Margin 6.08% Margin 6.27% Margin Return on Assets 24.78% Return 25.3% Return Asset Turnover 4.69 Times 4.04 Times Stockholders Equity 33.58% Return 35.09% Return The information that was examined indicates that Kudler Foods is doing well and if the company continues on its current path, profits will continue to grow, as long as other economic conditions confine the same.We conducted a vertical analysis of the balance sheet and income statement and instal that these figures indicated that the company is strong, and there were not any negative figures, which is always a high-priced sign. Some of the numbers were low, but that also was a good indicator, as the low numbers were the relationship between the expenses against the net sales. This indicates that there were more than enough sales to cover the expenses. We also found that when equivalence the net sales against the net profits, the percentage was a bit low, but still within a strong range. Overall Kudler Foods is a strong business that will continue to grow as it is managed carefully and changes are made when necessary to adjust to the market itself.Current Ratio up-to-date ASSETS/ sure LIABILITIES2002 2,102,631/977,188 = 2.1412003 1,971,000/116,290 = 16.951Acid-Test RatioCASH + SHORT-TERM INVESTMENTS + RECEIVABLES ( meshwork)/CURRENT LIABILITIES1 2002 89,016 + 1,131,213 + 196,503/977,188 = 1.4512003 1,430,000 + 86,000/116,290 = 131Receivables Turnover authorize creed sales/AVERAGE NET RECEIVABLES = X measure2002 10,107,787/185,907 = 54.4 Times = both 7 Days2003 10,796,200/141,251 = 76.4 Times = Every 5 Days account TurnoverCOST OF GOODS SOL D/AVERAGE INVENTORY = X TIMES2002 7,543,054/355,534 = 21 Times = Every 17 Days2003 8,474,831/401,634 = 21 Times = Every 17 DaysAsset TurnoverNET SALES/AVERAGE ASSETS = X TIMES2002 11,698,828/4,793,146 = 2.4 Times2003 10,796,200/3,984,733 = 2.7 TimesProfit MarginNET INCOME/NET SALES = X%2002 465,573/11,698,828 = 4.0%2003 676,795/10,796,200 = 6.3%Return on AssetsNET INCOME/AVERAGE ASSETS = X%2002 465,573/4,793,146 = 9.7%2003 676,795/3,984,733 = 17.0%Return on Common Stockholders EquityNET INCOME PREFERRED DIVIDENDS/AVERAGE COMMON STOCKHOLDERS EQUITY = X% 2002465,573 0/3,396,887 = 13.7%2003 676,795 0/2,274,380 = 29.8%Debt to Total AssetsTOTAL DEBT/TOTAL ASSETS = X%2002 1,491,747/5,294,216 = 28.2%2003 746,290/2,675,250 = 27.9%