Financial Ratio Analysis: Gemini Electronics

The first part is about liquidity. According to Gemini’s statement of cash flows, and then calculating the ratio for 2008 to 2009, the current ratio increased 0.04 from 2008 to 2009, which is 2.52 in 2008 and 2.56 in 2009. The current ratio equals to current assets / current liabilities. The higher the ratio, the stronger the liquidity of the enterprise assets and the stronger the short-term solvency. Compared to 2008, Gemini Electronics’ liquidity has improved, but still below the industry average. The second part is a question of efficiency. The cash conversion cycle (CCC) increased from 96.9 to 102.4. The cash conversion cycle is the average time required for an enterprise from paying cash to receive cash. In general, longer cash conversion

The third part is about solvency. Although the liquidity ratio affects the enterprise's solvency, we are still using the debt ratio in here as the most important reference. 2008 to 2009, the debt ratio (debt to assets) decrease from 0.65 to 0.63, and debt to equity decrease from 1.87 to 1.71, these indicators for the company are a positive result. This means that the company is increasing its assets and equity while reducing its own debt. However, it is worth noting that these two indicators are still higher than the industry average. Times interest earned is an indicator which to measure whether the company has the ability to pay interest to avoid the risk of debt, and whether there is financing capacity. Times interest earned decrease to 4.63 in 2009, while in 2008 it was 5.73. However, it was higher than the industry average. The forth part is about profitability. Investors are often most concerned about the company's

For an example, current ratio was lower than the industry average. The current ratio is the index that reflects the short-term solvency of the firm. As a result, competitors are more likely to pay off short-term debt. Although the gross profit margin was only 4% lower than the industry average. This indirectly shows that the company can reduce some operating expenses to increase gross margin. In 2009, Gemini Electronics made progress. The company's solvency has been improved, while the debt ratio has also been decreased. However, there still has a gap to the industry average on liquidity and solvency. In 2009 and 2008, the cash flow from investing was used primarily for land, plant and equipment. From a narrow perspective, only products and services can make profits. Plant, land and equipment will help companies increase their production