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Legacy Reserve: Case Study

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Legacy Reserves is a limited partnership with its headquarters located in Midland, Texas. They focus primarily on the acquisition and development of oil and natural gas in the Permian Basin, Mid-Continent and Rocky Mountain regions of the U.S. The objective of this project is to analyze the current conditions of the company, to identify current and potential problems along with a plan of action to fix such problems, and to make future financial predications based of trends and market data. Ratios: Liquidity Ratios are used to measure a company's ability to pay debt obligations and its margin of safety. The two most common liquidity ratios are the current ratio and the quick ratio. Current Assets Current Liabilities Ratio Q1 82,772 86609 0.9557 Q2 93,291 101098 0.9228 Q3 103,277 82840 1.2467 Q4 97,691 136984 0.7132 Current Ratio can be calculated by dividing the current assets by the current liabilities. It is primarily used to determine if a company is able to pay back its current liabilities, such as accounts payable, and other obligations and liabilities, with its current assets, cash accounts receivable, etc. As you can see, only one out of the four quarters resulted in a ratio of over 1. This is an issue, because it demonstrates that the liquidity of the company is either not high enough or the company is …show more content…

This enables comparisons of leverage to be made across different companies within the same industry. Legacy Reserves’ liabilities to assets ratio is extremely consistent, which is a positive. However, as compared to the industry leaders, their ratio is rather high. Since their ratio is more than two times greater than their competition, this is an issue. The amount of liabilities that they possess is increasing the riskiness of their company. Legacy should cut back on any type of debt, because they are only likening the failure of their

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