Financial Analysis - Research Paper Example

Financial Analysis Table of Contents Overview 3 Analysis of Can Go’s Financial 3 Recommendations 6 References 7 Overview The paper emphasizes on the analysis of the financial stance of Can Go which is an online based retail company dealing with the infotainment industry. In this paper, the liquidity ratio as well as the debt and the profitability ratios will be considered to evaluate the position of the company in contrast to the competition it faces in the industry. Analysis of Can Go’s Financial StateIn order to analyse Can Go’s financial strengths and weaknesses, in comparison to the industry average ratio, this paper will analyse the leverage, profitability and efficiency aspects of the company.

According to the financial data, the liquidity ratio of Can Go has been calculated to be 2.42%. On the other hand, the industry average current ratio or liquidity ratio was observed as 1.19% (assuming that the revenues and expenses have increased proportionately maintaining stability in the industry structure) (The Brandow Company, 2010). The company’s current ratio and the industry average current ratio is represented below graphically,With reference to the obtained data, it can be evidently stated that the company possesses competitive strength in terms of leverage.

It is worth mentioning that liquidity ratios depict the relationship of the company’s liquid assets or current assets with its current liabilities that in turn confirms the financial balance within the company (Brigham & Houston, 2009). As apparent from the chart represented above, the liquidity ratio or current ratio of Can Go is quite higher than that of the industry average. Thus, it can be stated that Can Go possesses significant competitive advantage in terms of liquidity in the industry.

On the similar context, the debt ratio of the company is calculated to be 1% which is below the average industry debt ratio, i.e. 1.58% (The Brandow Company, 2010). It can be represented through chart as following:It can be apparently witnessed that the company possesses noteworthy risk in terms of debt balances. Notably, debt ratio indicates the flexibility of an organization to repay the debts incurred at a specified time period with ease and efficiency (Brigham & Houston, 2009). Therefore, with a lower debt ratio than that of the industry average depicts that the company shall have to face significant challenges when repaying the debts efficiently to its creditors.

With an in-depth point of view, the profitability of the firm can also be identified as poor in comparison to the industry average ratios. For instance, the profit margin (0.11%) and return on total assets (0.02%) of Can Go are observed to be less than that of the industry ratios, i.e. 0.38% and 0.07% respectively (The Brandow Company, 2010). On the other hand, gross profit ratio of the company is observed as equal to the industry ratio. To represent the facts through charts,Analyzing these ratios, it can be apparently stated that Can Go requires implementing effective strategies with the objective to enhance its profitability and thus gain competitive advantage over the competition in the industry.

The efficiency ratio of the company also tends to be less than the industry average which depicts the efficiency of the company in terms of finances to be poor. The efficiency ratio of the company calculated is 0.72% while the industry average ratio is 0.91% (The Brandow Company, 2010) as can be observed from the chart below.RecommendationsWith due consideration to the above revealed facts regarding the financial position of Can Go in comparison to the industry average ratios, it can be evidently stated that the company requires re-considering its financial strategies.

In order to enhance its financial status, the company shall consider reserve allocations for debts, or probable losses to occur. Furthermore, it can restructure its financial structure with the introduction of working capital and taking advantage of its liquidity efficiency. ReferencesBrigham, E. F. & Houston, J. F., (2009). Fundamentals of Financial Management. Cengage Learning. The Brandow Company, (2010). Corporation Industry Financials. Arts Entertainment Recreation. Retrieved Online on September 20, 2011 from http://www.bizstats.com/corporation-industry-financials/arts-entertainment-recreation-71/other-arts-entertainment-and-recreation-711/show