Ratio Analysis

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Key West Productions

• Ratio Analysis

By Catherine Lee
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Division A
Shows Least Impressive Performance
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Division A

• Strengths-
• Current Ratio is lowest of all Divisions, means
  that they are managing their cash well by
  investing.
• High potential for returns
• High level of return division is earning a
  higher rate of return on assets than it is paying
  to borrow
• Collection period is decent
• Weaknesses
• Very High Level of Risk
• Lowest profit margin low profitability
• Lowest Return on Assets
• Inventory held is stock too long

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Division B
Mediocre Performance
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Division B

• Strengths
• Good Quick Ratio firm has ability to pay
  current debts
• Lowest Risk out of all divisions
• Higher profit margin than Division A
• High return on assets
• Weaknesses
• High current Ratio holding too much cash, not
  making return on these current assets
• Lowest potential for return of all divisions
• Low return on equity

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Division C
Most profitable Division
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Division C

• Strengths
• High Quick Ratio Division can cover debt
• Good Debt to Asset Ratio
• High Profitability
• Very High return on equity- making good use of
  debts
• Collection period close to industry standards
• Weaknesses
• Current Ratio is High indicates poor cash
  management
• Inventory turnover is very high may be
  incurring additional inventory costs/storage

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Entire Corporation
Corporation has an impressive performance
overall, ratios are close to industry standards
and in some cases even more favorable
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Entire Corporation

• Strengths
• Good ability to pay current debt better than
  industry standards
• Good debt to asset ratio a little more risky
  than industry standards
• High profitability
• High return on assets/return on equity- company
  is doing well with the recourses it has
  available.
• Decently restrictive credit terms/ not too high
  not too low
• Weaknesses
• May be some overall poor cash management
• Inventory is held a little too long

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Ratio Chart
Return on Assets
Profit Margin
Return on Equity