Ratio Analysis : Ratio And Ratio Essay
Table 4. Industry Average Ratios Table 5. Ross Stores Ratios Tables 4 and 5 represent the industry average ratios for the past five years, and the Ross ratios for the same five years respectively.
Liquidity ratios are a measure used to find a company ability to pay its short-term debt obligations. If the ratio is high, the company is successfully paying its debt in a timely matter. The tables show a decreasing trend in the industry, current ratio, quick ratio, and cash ratio averages have been decreasing every year for the last five years. This means that the companies are not efficiently paying off their short-term debt. This trend is reflected in Ross’ performance in the past four years however, in the last year Ross has been able to increase all three ratios reflecting their ability to pay the short-term debt. The numbers show that Ross is still under the industry average for the liquidity ratios, but it has been able to change the negative trend to a positive one in the last year.
The total debt ratio, debt equity ratio, and equity multiplier show the financial risk of a company based on the leverage; the more leverage, the higher the financial risk. The industry average is decreasing until the last year, then increases again. For Ross, the total debt ratio keeps decreasing until the base year where it increases a little bit again. Compared to the industry, Ross is performing slightly better with 0.51 compared to the 0.52 reflected in the industry.…