Corporate Finance Essay

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Part 1: Fianacial Ratios

After having the financial information about Deep water experts company, we have generated the financial ratios for the company for the years 2010, 2011 respectively as below and has the following comments:
Liquidity:
There is more than one ratio that measures the liquidity for a company which is included in the following table: Ratio Type | 2011 | 2010 | Liquidity | Current Ratio | 3.29 | 2.67 | Quick Ratio | 2.2 | 1.798 | Cash Ratio | 1.56 | 1.08 |

1. Current ratio: indicates a company's ability to meet short-term debt obligations.

For 2011= 3.29 and for 2010= 2.67.
From creditor's view a high current ratio is better than a low current ratio and as we can see it increased in 2011. …show more content…
3. Profit margin: indicates how well the company converts sales into profits after all expenses are subtracted out.

For 2011= 5.2 and 2010= 6.2.
The ratio is decreased which indicates that the company is making less profit in 2011 this might be due to increase in expenses.

Part 2; Benchmarking

2011 2010 | Lower Quartile | Median | Upper Quartile | Current Ratio | 3.29 | 2.67 | 0.52 | 1.43 | 1.89 | Quick Ratio | 2.2 | 1.798 | 0.21 | 0.38 | 0.62 | Cash Ratio | 1.56 | 1.08 | 0.08 | 0.21 | 0.39 | Total Asset Turnover | 1.086 | 1.16 | 0.68 | 0.85 | 1.38 | Inventory turnover | 9.3 | 12.89 | 4.89 | 6.15 | 10.89 | Receivables turnover | 23.35 | 23.37 | 6.27 | 9.82 | 14.11 | Total Debt Ratio | 0.5 | 0.417 | 0.44 | 0.52 | 0.61 | Debt Equity Ratio | 1 | 0.716 | 0.79 | 1.08 | 1.56 | Equity Multiplier | 2 | 1.716 | 1.79 | 2.08 | 2.56 | Time Interest Earned | 3.295 | 4.61 | 5.18 | 8.06 | 9.83 | Cash Coverage Ratio | 5.52 | 7.53 | 5.84 | 8.43 | 10.27 | Profit Margin in % | 5.2 | 6.2 | 4.05 | 6.98 | 9.87 | Return on Asset in % | 5.65 | 7.22 | 6.05 | 10.53 | 13.21 | Return on Equity in % | 11.3 | 12.4 | 9.93 | 16.54 | 26.15 |

After looking at the financial ratios for retail industry (Sporting Goods) as a benchmark with the ratios that we have calculated for Deep Water Experts
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