Lesly Martinez
American InterContinental University
Financial Management 310
Dr. Jeff Ohanaja
December 11, 2014
Financial Analysis
a) Financial ratios can provide valuable analysis for business professionals and can be especially useful when comparing relationships within financial statements (Jewell, 2013). The three groups that use ratio analysis are managers, lenders and stockholders. The reason these three groups use ratio analysis is to compare a company over time with other companies.
b) The company’s liquidity position for current and quick ratio from 2009-2011, show some fluctuation; the biggest improvement is shown in 2011. Overall, all three years are below the industry average.
Current Ratio = Current Assets/Current Liabilities
= $2,680,112/$1,039,800 = 2.58
Quick Ratio = (Current Assets – Inventory)/Current Liabilities
= ($2,680,112 - $1,716,480)/$1,039,800 = 0.93
c) Computron’s utilization of assets stack up is positive to that of other firms in the industry, as the industry average numbers are lower.
Inventory Turnover = Sales/Inventory
= $7,035,600/$1,716,480 = 4.10
DSO = Receivables/(Sales/365)
= $878,000/($7,035,600/365) = 45.5 Days
Fixed Assets Turnover = Sales/Net Fixed Assets
= $7,035,600/$836,840 = 8.41
Total Assets Turnover = Sales/Total Assets
= $7,035,600/$3,516,952 = 2.0
d) Relating the ratios from the debt, times-interest earned and EBITDA coverage ratios, I can conclude that the ratios vary tremendously, but ending with a strong industry average.
Debt Ratio = Total Liabilities/Total Assets
= ($1,039,800 + $500,000)/$3,516,952 = 43.8%.
Tie = EBIT/Interest
= $502,640/$80,000 = 6.3
EBITDA = (EBITDA+ Lease Payments) / (Interest + Loan Re-Payments + Lease Payments)
= ($502,640 + $120,000 + $40,000)