Finance Essay Example | Topics and Well Written Essays - 1000 words - 4

Finance - Essay ExampleGitman(2005) in these words A firms ability to pay off its piddling term obligations as they enter due(p.58). It is one of the most important financial indicators of a firm. A firm which will not be able to satisfy its short term obligations will neither be able to satisfy its long term obligations/debts nor will be able to satisfy its stockholders. Time serial publication analysis of Jools Product divergence shows unfavorable results, as out of five indicators four are showing disallow results. Although current assets lease increased in 2009 as compared to 2008 but increase in current liabilities is more(prenominal)(prenominal) as compared to current assets so ingredients liquidity has decreased. Increase in inventory derangement shows that division is now more efficient in selling its inventory. While increase in debtors days shows that firm making more credit sales now and is inefficient in collecting its receivables and indicates that money is tie d up in debtors. Decrease in creditors days shows that divisions credibility has decreased and its suppliers are allowing it less time to pay them keister. Division should take prompt actions to decrease its current liabilities which will not only increase its liquidity but will as well increase its credibility in front of its suppliers and other stakeholders. Moreover firm should adapt any machine to quickly collect its receivables. Asset turnover shows that division has ratio of 1.06 in 2009 which is higher than that in 2008 because the assets have increased but sales has also increased by a greater percentage. It shows that division is more quick in concerting its assets into sales now. Profitability analysis of the Jools Products division shows very favorable results as all of the profit indicators are showing highly favorable results which are not only earnest for division but will also contribute in overall profitability of Jools. besides although the division is profita ble but management should fix the problem of increasing current liabilities and should control operating expenses and receivables as it said by Gibson Even a very profitable entity will find itself bankrupt if it fails to touch its obligations to short term creditors.(p.253) Kitchen Division Category Ratio 2009 2008 Result Liquidity Ratios Current Ratio 2.02 0.4 favorable Quick Ratio 0.99 0.78 Favorable Stock Turnover 60.74 49.87 Favorable Debtor age 15.52 18.17 Favorable Creditors Days 10.22 12.01 discriminatory Efficiency Ratios Asset Turnover 2.20 2.33 Unfavorable Net working Capital Turnover 10.13 13.67 Unfavorable Profitability Ratios Net Profit Margin 3.51% 3.27% Favorable Operating Profit Margin 3.88% 3.61% Favorable beget on Assets 7.71% 7.62% Favorable Return on Equity 11.77% 11.90% Unfavorable Critical Analysis- Time series analysis of Jools Kitchen Divisions liquidity shows favorable results. Division has a healthy short term obligations fulfilling ability. Inventor y is efficiently sold, less credit sales are allowed and receivables are quickly collected. But in spite of its good liquidity conditions creditors are still allowing less time to pay back which is a matter of concern for management. Efficiency analysis of the