Financial Management

a . Profitability and Resource Utilization Liquidity Accounts Payable 2 ,200 ,000

Accrued expenses 150 ,000

Notes Payable 400 ,000

Current Liabilities 2 ,750 ,000

Financial Stability Current Liabilities 2 ,750 ,000

Long-Term Debt 2 ,500 ,000

Note that under the fixed charge only the lease was considered and the depreciation was omitted . This was undertaken in to highlight the analysis on the lease of the company , which is a substantial element concerning the financial stability of the firm

Financial Analysis from Ratios Computed Above

The financial analysis of

the company at hand will be divided between the three main areas of finance , which encompass profitability financial position and stability . This is also done in accordance to the classification of the accounting ratios above

Financial Performance of Ryan Boot Company

All the profitability and resource utilization ratios are lower than the industry average . These outline that the financial performance of the firm is not very well . The profit margin for instance , reveals that the profit generated from every 100 of sales is lower . This is probably the cause of lack of efficiency , indicating the need of cost control exercises to limit expenditure . The value added statement , can be useful in such case , which outlines the expenses that are adding value to the company . This will aid management in outlining non-value added costs , which ought to be removed

In view of the aforesaid lack of efficiency the return on assets and equity is also low . Again solution to such ratio stems from cost control . Management should meticulously examine the operations of the company to ensure that the resources are used effectively . In view of the high amount of debt noted in the financial stability section it is not wise to suggest to limit the equity finance to increase the return on equity ratio , because this will lead to an increase in debts

The fixed-asset and resources of the company to generate sales . Therefore attention should also be placed in the effectiveness of resource utilization rather than focusing solely on cost control . For instance marketing activities should be monitored to ensure that they are aiding the market growth strategy of the firm

Financial Position of Ryan Boot Company

On the contrary to profitability , the liquidity of Ryan Boot Company is better than the industry average . The capability of the current assets and most liquidity assets (excluding inventory ) to cover short-term liabilities is higher than the industry average . This is portrayed under the current ratio and quick ratio . Such positive figures indicate that the working capital management of the company is very effective and is thus enhancing a sound liquidity for the organization

Even though a good working capital management is noted , the credit control function in the organization is lacking effectiveness . This is revealed by the lower receivables turnover ratio , which highlights the proficiency of the company in collecting debts . Prolonging the accounts receivable duration holds a negative effect both on the liquidity and profitability of the firm . From the liquidity aspect...