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Analysis Of Cango's Inventory Turnover Ratio

450 Words2 Pages

The financial analysis performed gave us a very good insight about CanGo financial performance. It can be seen that CanGo has very low profitability ratios and they also are not able to effectively use it resources correctly based on their low turnover ratios. The company has leveraged a lot because of their high debt equity ratio. This information shows that it is necessary for CanGo to take better control of their financial performance and generating cash for the company. They also need to utilize available resources better and ensure that they are able to generate good returns for the company and its shareholders. The company should focus on not taking on more debt, but on better using its existing resources and infrastructure to generate …show more content…

These ratios will provide insight into the true state of CanGo’s financial stability. CanGo had an Inventory Turnover Ratio of .28 however Amazon currently has an Inventory Turnover Ratio of .11. This indicates that CanGo manages its inventory well. If the ratio was lower it would indicate that there was overstocking. CanGo’s Debt to Equity Ratio, meanwhile, stands at .67 with Amazon recording a ratio of .44. In this case, CanGo is not performing well because a high Debt to Equity Ratio generally means that a company has been aggressive in financing its growth with debt. Debt includes things such as stocks, bonds, and loans that the company borrowed against. CanGo’s Current Ratio is 5.38 and Amazon’s Current Ratio is 1.33. CanGo is performing well in this area compared with its primary competitor because this ratio shows that CanGo is more than capable of repaying its debits and liabilities. The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its debt if they were due. CanGo shows a Net Profit Margin of .8 (80%), whereas Amazon shows a Net Profit Margin of .2 (20%). This means that 80% of CanGo’s dollars made per sale is counted as a profit to the

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