Mr. Morrison and team, the survival of our company relies on how well we handle our financial practices. After reviewing our annual report, there are some aspects that are important to note. Our financial reports reveal a lot about the wellbeing and survivability of our business. Reviewing the reports will assist us in making informed decisions about our operations (Nickels, McHugh, & McHugh, 2012).
In order to make informed decisions, we will employ a ratio analysis from our annual report. Ratio analysis is an evaluation of a business 's financial standing. We can use our financial analysis to compare our performance towards our financial objective, as well as our standing in comparison to other businesses that are in our activity (Nickels, McHugh, & McHugh, 2012). Being aware of our strengths and vulnerabilities concerning our finances is essential to the sustainability of our company. Paying attention to the liquidity ratio is an important aspect to the businesses sustainability. The decision to highlight its importance will communicate to us how quickly we can take our resources and convert them to cash. We rely on the cash to pay our debts that are owed within one year. The current ratio will specifically tell us if we are financially secure for the next year. This ratio was chosen because if in the future we need to secure a loan, we are aware that the lender will look at this specific ratio to make their determination for or against us borrowing money (Nickels, McHugh, & McHugh, 2012). This communicates to the lenders that we can pay our obligations. If an emergency situation occurs, the lenders know we can liquidate our properties for monies to sustain the company. This situation will give us the knowledge needed to make decisions in order to sustain the business if this problem arises. A part of sustaining the business is to ensure we are using our resources to attain profits. The performance ratio will measure this for us. Specifically, the earnings per share ratio will show us how our earnings are stimulating the growth of our business and providing for the stockholders’ dividends (Nickels, McHugh, & McHugh, 2012). This will communicate our capability to earn a suitable return. The performance ratio was chosen so we could be aware of what will stimulate more profit for the business. After calculating our current ratio for the past three years, the business has stayed well under the 2.1 standard. …show more content…
Staying under 2.1 communicates a satisfactory standing amongst our finances (Stone, 2011). In 2013, our current ratio was a 1.37. In 2014, it was 1.38. In 2015, it was a 1.49. Although our current ratio has increased slightly each year, it is a clear indication that our business performance proves we have the resources available to convert to cash if the need arises. If our ratio were too low, it would communicate that we would have a hard time paying for our liabilities. And, if our ratio were too high, this would communicate that we are carrying too much inventory (Lan, 2012). Neither can be said concerning our business. Our ratios are right where they need to be and are not considered too high or too low. The next calculation to touch on is our earnings per share ratio. Since our company operates within a commerce that is easily simulated by others, our margins can typically appear as being low (Lan, 2012). However, this is nothing to concern ourselves with. Our earned per share ratio is reported quarterly meaning the earned share price shows four times a year. In 2015, we ended our quarter with earnings per share at $0.68. The year prior we ended the quarter at $0.58 per share. That reflects a change of $0.10 per share. This indicates our …show more content…
The survival of our company relies on how well we handle our financial practices. Utilizing the ratio analysis shows us our financial standing. Paying attention to the current ratio and the earnings per share in our financial report will communicate to us our cash flow, also how we are earning returns for our business. Improving on monthly payments, along with the repurchasing of stocks, will increase the revenue that is generated. We owe it to the employees, stockholders, and lastly, ourselves to ensure that we are using sound financial
In order to make informed decisions, we will employ a ratio analysis from our annual report. Ratio analysis is an evaluation of a business 's financial standing. We can use our financial analysis to compare our performance towards our financial objective, as well as our standing in comparison to other businesses that are in our activity (Nickels, McHugh, & McHugh, 2012). Being aware of our strengths and vulnerabilities concerning our finances is essential to the sustainability of our company. Paying attention to the liquidity ratio is an important aspect to the businesses sustainability. The decision to highlight its importance will communicate to us how quickly we can take our resources and convert them to cash. We rely on the cash to pay our debts that are owed within one year. The current ratio will specifically tell us if we are financially secure for the next year. This ratio was chosen because if in the future we need to secure a loan, we are aware that the lender will look at this specific ratio to make their determination for or against us borrowing money (Nickels, McHugh, & McHugh, 2012). This communicates to the lenders that we can pay our obligations. If an emergency situation occurs, the lenders know we can liquidate our properties for monies to sustain the company. This situation will give us the knowledge needed to make decisions in order to sustain the business if this problem arises. A part of sustaining the business is to ensure we are using our resources to attain profits. The performance ratio will measure this for us. Specifically, the earnings per share ratio will show us how our earnings are stimulating the growth of our business and providing for the stockholders’ dividends (Nickels, McHugh, & McHugh, 2012). This will communicate our capability to earn a suitable return. The performance ratio was chosen so we could be aware of what will stimulate more profit for the business. After calculating our current ratio for the past three years, the business has stayed well under the 2.1 standard. …show more content…
Staying under 2.1 communicates a satisfactory standing amongst our finances (Stone, 2011). In 2013, our current ratio was a 1.37. In 2014, it was 1.38. In 2015, it was a 1.49. Although our current ratio has increased slightly each year, it is a clear indication that our business performance proves we have the resources available to convert to cash if the need arises. If our ratio were too low, it would communicate that we would have a hard time paying for our liabilities. And, if our ratio were too high, this would communicate that we are carrying too much inventory (Lan, 2012). Neither can be said concerning our business. Our ratios are right where they need to be and are not considered too high or too low. The next calculation to touch on is our earnings per share ratio. Since our company operates within a commerce that is easily simulated by others, our margins can typically appear as being low (Lan, 2012). However, this is nothing to concern ourselves with. Our earned per share ratio is reported quarterly meaning the earned share price shows four times a year. In 2015, we ended our quarter with earnings per share at $0.68. The year prior we ended the quarter at $0.58 per share. That reflects a change of $0.10 per share. This indicates our …show more content…
The survival of our company relies on how well we handle our financial practices. Utilizing the ratio analysis shows us our financial standing. Paying attention to the current ratio and the earnings per share in our financial report will communicate to us our cash flow, also how we are earning returns for our business. Improving on monthly payments, along with the repurchasing of stocks, will increase the revenue that is generated. We owe it to the employees, stockholders, and lastly, ourselves to ensure that we are using sound financial