Gemini Electronics: Financial Analysis

Gemini Electronics has become a successful electronics company that looks to be growing on an upward slope. We can see where Gemini is booming, as well as where they are lacking, by analyzing their Ratios and Statement of Cash Flow. Liquidity measures a firm’s ability to meet its cash obligations; shown by calculating the Current Ratio and the Quick Ratio. Gemini’s liquidity has slightly increased from 2008 to 2009, but remains below the industry average. An acceptable Current Ratio should be around 2:1, which Gemini has exceeded in 2008 (2.52:1) and 2009 (2.56:1). This means that every dollar of current liabilities is backed by just over $2.50 worth of current assets, which is a positive for any business. Gemini’s Quick Ratio has barely changed

Due to the fact that an acceptable Quick Ratio is around 1:1, Gemini is in good shape with their Liquidity ratios. This was during a time with a falling U.S. dollar and emerging Korean competition in the market, yet Gemini still was able to meet its short term cash obligations.
The objective of any business is to ensure that resources are being used efficiently to produce an acceptable return. For Gemini, we can analyze their Efficiency by inventory days and total asset turnover. Gemini’s parts have remained about the same from 2008 to 2009 at 49.2 and 48.8, significantly above the industry average of 32.3 days. Though they have decreased by 1 day, it is still much longer than the average. This means Gemini has inventory parts that sit for almost 50 days. This is because Gemini still had to source many of its parts from Asian contractors, resulting large part inventories being maintained due to long delivery times. Their Work in Process has increased by 0.01 from 2008 to 2009 and it remains less than half of the industry average. Additionally, due to the rapid technology, Gemini’s Finished Goods remains monumentally smaller than the industry average. It

Though having dropped from 0.65 in 2008 to 0.63 in 2009, this is still significantly higher than 0.5. This means that 63% of Gemini’s assets are financed by debt, thus the lenders bear the greatest risk. This is because Gemini financed all land, equipment and some patents with term loans. Though the Debt to Equity Ratio conveys the same information as the Debt Ratio, we see that from 2008 to 2009 this number has dramatically dropped. As opposed to using 1.87 in borrowed funds compared to each dollar provided by shareholders like in 2008, Gemini now only uses 1.71. According the Time Interest Earned Gemini has $4.63 of earnings before interest and taxes available per dollar of interest charges to pay interest and taxes, down from the $5.73 in 2008. Though having decreased, Gemini remains above the industry average of $3.21 by a considerable