Fnt 1 Memo

In: Business and Management

Submitted By rward7500
Words 1263
Pages 6
To: CEO of Company G
Date: 12/29/2012
Re: Firms Financial Condition
A comparison using a horizontal analysis of both the balance sheets and income statements from year 2011 and year 2012 has been completed along with a review of ratios and company trends to provide you with the financial condition of your home centers. After a careful review of the analysis, ratios and trends within the industry the outcome has been determined as followed:
The Current Ratio measures a company’s ability to pay its short-term obligation with current assets. In year 12 company G has a current ratio of 1.79. This ratio has declined from last year of 1.86. When compared to the industry quartiles this ratio falls below the first quartile of 3.1 and below the second quartile of 2.1. This would indicate a weakness for the company. This determines the ability you have to pay back your short term liabilities. Monitoring this area to provide improvement is recommended.
Sometimes called the quick ratio, this ratio measures a company’s ability to pay its short-term liabilities if they were to come due immediately without selling inventory. In year 12 Company G has a ratio of .43. When compared to last year this ratio has declined from .64. When compared to the industry quartiles this ratio falls below the first quartile of 1.6, above the second quartile of 0.9, and above the third quartile of 0.6. This would indicate a weakness for the company.
The inventory turnover measures the amount of times a company’s inventory is sold and replaced over a period of time. In year 12 Company G has a ratio of 5.26 rounded would be 5.3. When compared to last year this ratio has declined from 6.1. When compared to the industry quartiles this ratio falls below the first quartile of 13, below the second quartile of 10.2, and below the third quartile of 8.3. This would indicate a weakness for…...

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