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Financial statement - Essay Example

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Receivables Turnover ratio. I believe that based on the RTR , the overall risk and profitability of Athletic Attic has improved from 2012 to 2013 because the ratio of turnover of receivables has increased. This means accounts receivables are collected faster in 2013 than…
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Download file to see previous pages (Strategos, 2014) An inventory turnover is the number times per year inventory is replaced. A quick turnover is desired in business because it is a reminder that inventories should not stay in the shelves too long. A high ratio means that sales are doing good and shows lower risk of too many unsold stocks. Inventory turn-over that is out of proportion to the industry norms is an indication of marketing problems of management like poor customer services
3. Current Ratio. Although the Current Ratio for 2013 is lower than 2012, this should not be a matter to be worried about by creditors, because the ratio is still high. This means company can still pay its maturing obligations. The accounting rule states, “the higher the ratio, the more capable the company is of paying its obligations and a ratio of below 1 means company would not be able to pay its obligations” (Accounting Coach 2014)
4. Debt to equity ratio. The D/E shows a slighter decrease in 2013. A 0.25 D/E ratio means the company has not been aggressive in financing its growth. A low D/E is favorable to stockholders because it does not use a lot of debt to increase its operations. A D/E is the “proportion of company’s asset supplied by company’s creditors vs. the amount supplied by the stockholders.”(Accounting Coach 2014).
5. Gross profit ratio. As in previous ratios, the 2013 GPR shows variance with 2012 exhibiting a lower ratio. GPR is the % of sales available for expenses and profit after the cost of goods sold is deducted, it is otherwise known as gross profit margin. I believe the average is not risky because Industry average of 33.91% is not very far from 0.3461 our case.(CSIS Market, 2014) .
6. Return on assets means the number of cents earned for every dollar of assets. A high value of ROA high means business is profitable. Comparing the 0.41% ROA to the industry average, which ...Download file to see next pagesRead More
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