Ethan Stanchik Finical Management Professor 08/11/2017 Financial Statement Analysis paper To find the current ratio of the company you take current assets divided by current liabilities. 2,680,112/1,039,800 = 2.6. This ratio shows us how well the company’s ability to pay back its liabilities, which are debt and accounts payable, and how well they can pay it back with their assets. Assets are cash, marketable securities, inventory and accounts receivable. This ratio gives a broad idea of the company’s financial health, which in this case is .10 below the average. Although this is a low ratio, it is ok because you at least want your ratio to be at over 2. A smaller current ratio tells us that a firm may have a hard time paying their current liabilities in the short term. With a low ratio, this means that even if your company liquidates all of its current assets, it still wouldn’t be able to cover its current liabilities. A higher ratio like our current ratio means we have less chance of a cash squeeze. In finding the quick ratio you take current assets minus inventories, then divide it by the current liabilities. (2,680,112-1,716,480) / 1,309,800 = .93. This ratio compares the cash, short-term marketable …show more content…
This may be one of the worst ratios for this company. Days sales outstanding tells us the average number of days that company takes to collect revenue after a sale has been made. Due to the high importance of cash in a running business, it’s always in the best interest of the company to receive outstanding receivables, because money that a company spends time waiting to receive is money lost. That money could be reinvested, thereby generating more sales. By this ratio being so high means they aren’t getting the money in time and cannot reinvest the money. This is just dead money which is hurting the company’s