Evaluating Profitability:
RATIO: Based on Fire Eaters Historical Financial Data At Virtual Lakes Store (2013-2016) 2013 2014 2015 2016
Net Profit Margin -173.58% -47.83% -10.88% 12.56%
Gross Profit Margin -188.24% -15.25% 37.86% 69.76%
Return on Total Assets -40.52% -35.00% -11.60% 18.35%
Return on Owner's Equity -65.86% -58.55% -21.12% 38.79%
Analysis:
Initially the negative relation briefly shows that Fire Eaters had a greater expense compare to its income. At its most negative Net Profit Margin of -173.58%, the value tells the business has made a loss of $1.74 for each dollar of sales. However this figure gradually increases over the time period becoming a positive relation in 2016, of 12.56%. Therefore currently the business is looking …show more content…
However, the working capital on the second year 2014, showed a decrease before increasing on 2015 to 2016, which can be accounted for by factors such as incurring new debts. But overall there is a business growth and with the compounding capital, it is only sensible that expansion is a very liable option so Fire Eaters can reinvesting its money to improving the business.
Fire Eater’s over the period of four years have never had its Current ratio fall below one, whereby current assets equal current liabilities. Initially in 2013 the business had a very high current ratio of 4.16 which can be accounted for by, excess start-up capital. This historical data shows evidence of efficient management, which kept the Current ratio between the range of 2.1 and 2.6. Revealing the business was able to meet its current obligations at the time, twice over.
The business’s Quick ratio over the four years calculated to be greater than one, showing Fire Eater’s short-term liquidity be able to meet obligations. The dollar amount of liquid assets available for each dollar of current liabilities by 2016 is 2.51 as by the quick ratio meaning Fire Eater’s has $2.51 of liquid assets available to cover each $1 of current liabilities therefore giving the business a well-established liquidity
RATIO: Based on Fire Eaters Historical Financial Data At Virtual Lakes Store (2013-2016) 2013 2014 2015 2016
Net Profit Margin -173.58% -47.83% -10.88% 12.56%
Gross Profit Margin -188.24% -15.25% 37.86% 69.76%
Return on Total Assets -40.52% -35.00% -11.60% 18.35%
Return on Owner's Equity -65.86% -58.55% -21.12% 38.79%
Analysis:
Initially the negative relation briefly shows that Fire Eaters had a greater expense compare to its income. At its most negative Net Profit Margin of -173.58%, the value tells the business has made a loss of $1.74 for each dollar of sales. However this figure gradually increases over the time period becoming a positive relation in 2016, of 12.56%. Therefore currently the business is looking …show more content…
However, the working capital on the second year 2014, showed a decrease before increasing on 2015 to 2016, which can be accounted for by factors such as incurring new debts. But overall there is a business growth and with the compounding capital, it is only sensible that expansion is a very liable option so Fire Eaters can reinvesting its money to improving the business.
Fire Eater’s over the period of four years have never had its Current ratio fall below one, whereby current assets equal current liabilities. Initially in 2013 the business had a very high current ratio of 4.16 which can be accounted for by, excess start-up capital. This historical data shows evidence of efficient management, which kept the Current ratio between the range of 2.1 and 2.6. Revealing the business was able to meet its current obligations at the time, twice over.
The business’s Quick ratio over the four years calculated to be greater than one, showing Fire Eater’s short-term liquidity be able to meet obligations. The dollar amount of liquid assets available for each dollar of current liabilities by 2016 is 2.51 as by the quick ratio meaning Fire Eater’s has $2.51 of liquid assets available to cover each $1 of current liabilities therefore giving the business a well-established liquidity