Marginal Analysis
CEO
Re: Financial Analysis
I have completed my financial analysis of Company G. It is my general impression than Company G. is in good financial health. Thirteen financial ratios were calculated and this analysis shows that the company is generally a mid-range performer. With respect to the liquidity of Company G, that is questionable. The current ratio is within industry norms, but declined in the past year. The acid-test ratio is a weakness, and it has declined in the past year significantly. In the long run, we enjoy a favorable debt ratio. It has increased slightly but still outperforms industry norms. As we have a relatively low level of debt, our interest coverage remains very healthy, and has increased in the past year.
Inventory turnover remains a concern. It was below industry norms last year, and this year has declined further. Sitting on this much old inventory invites taking a writedown, which will affect the earnings per share that our customers value. Further, our accounts receivable is below par. The accounts receivable turnover has moved from a point of no concern to being a weakness in the past year. The days' sales in receivables remains of no concern and has increased slightly in the past year.
In general, our returns are in line with our industry peers. The return on shareholder's equity is a strength, and this increased slightly...
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