Cash, Accounts Receivable and Short-term investments and is compared to Current Liabilities. A higher Acid-Test Ratio is desired and should be near 1. A 1.00 result would show that a company can meet their most current obligations. The formula to calculate the Acid-Test Ratio looks like this: Acid-Test Ratio equals the sum of Cash, Short Term Investments and Accounts Receivable
Net divided by Current Liabilities. YR12 Acid-test ratio for Company G is 0.43 which is down from 0.64 in YR11. The industry quartile data of 1.6, 0.9 and 0.6 shows that Company G is well below the 1st quartile in the industry. This is a weakness in Company G and should be evaluated further. INVENTORY TURNOVER
Inventory turnover ratio shows the number of times a company’s inventory is turned over in a specific period. It measures the how quickly items or inventory is sold during the period. …show more content…
The Debt Ratio formula is: Debt Ratio equals Total Debt divided by Total Assets. Company G’s Debt Ratio percentage had increased slightly from 28.34% in YR11 to 29.76% in YR12. Comparing YR12’s 29.76% is above the 75th quartile of 30.0% for the industry. This is a strength for Company G.
The Times-Interest Earned ratio is used to determine a company’s ability to stay on top of debt payments and shows how many times an organization can pay its interest payments. A reasonably high ratio in this area would be desirable, however, too high a ratio can be considered undesirable and may mean the company has a lack of debt. This ratio is calculated using this formula: TimesInterest Earned equals Income from Operations divided by Interest Expense. If you compare this ratio, YR12 was 36.51 which had increased from YR11 with 31.12. The 36.51 number is well above the 75th quartile for the industry. I believe this result to be a strength, however, I do recommend additional analysis in this area be supported again, too high a number could mean that a lack of debt exists.
RATE OF RETURN ON NET