financial analysis Essay

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SPARTECH Corporation 2009 2010 Industry Average
Current Ratio 1.6 times 1.5 times 2.26
Quick Ratio 0.88 times 0.85 times 0.87
Average collection period 51 days 48 days 13 days
Days inventory held 28 days 31 days 134 days
Days payable outstanding 47 days 52 days 37 days
Cash Conversion Cycle 32 days 27 days 133 days
Cash flow from operating activities 65,264 39,330

Current Ratio Trend: In both years, the company has the ability to use its resources …show more content…
This means for every one dollar generated in sales, 13 cents remain in the company to pay for its operating expenses, income taxes, dividends and etc. If we were to assume, all products sold by the company sell for $ 1.00, then in 2009 the company made 13 cents and in 2010 the company made 11 cents from each sale. The gross profit has decreased by 2 cents over 2009. This means the company's management team is not improving in its price setting policies and/or reducing the company's production costs, or a combination of both. At any rate decreasing gross profit margin is making less from each sales.

Operating profit margin: The operating profit margin of Spartech Corporation has decreased by 8.8 percent from 2009. This means the Spartech Corporation profitability is declining. The business is not efficient in controlling its overall costs. In 2010, the company has a negative ratio which means the company is losing money on each sale and can't pay its fixed cost with revenues.

Net profit margin: The net profit margin in 2010 is negative which indicates a bad performance and

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