Maria Hernandez Case Essay

1118 Words Nov 14th, 2012 5 Pages
The Story:

Maria Hernandez & Associates is a company that started its business with a cash deposit. On June 20,2004 Maria Hernandez transferred all her savings of $30,000 into a new Bank account under her company’s name, two days later she transferred another $20,000 which she had borrowed from her father on a 6% p.a. interest rate. Thus, with an amount of $50,000 in its bank account Maria Hernandez and Associates was ready to start its life in the Webpage designing sector. After the Bank account transactions, Maria Hernandez quickly took care of the initial expenses that included pre-paid rent for the new office, giving a security deposit for the same, buying used computers and software from her
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However, given the fact that the operation is only 2 months old, the figures are very promising; especially since there was an increase in workload of the company in early August with four new clients by way of referrals.

Considering all the ratios in more details we would like to start our analysis with ROE ratio that measures a company’s profitability. We have 13% what means that the company is making 13 cents out of every dollar invested. This figure is relatively low, but for a start-up company it is rather satisfactory, because it indicates a growth opportunity with increasing operations.

ROA ratio shows us how many dollars the company makes in relation to its assets, thus 7 cents per 1 dollar. The ratio is deceptive because by definition a lower ratio denotes inefficient use of assets. But considering a start-up that operates for only 2 months, there is a scope for improvement since the number of operations has been increasing. In addition, this ratio can vary depending on the industry in which the company operates. This is why our suggestion to Maria Hernandez is to compare ROA every month in order to be able to realize how productive or unproductive the business is.

Profit margin represents the percentage of revenue that a company

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