Finance Essay Example | Topics and Well Written Essays - 1000 words - 4

Finance - Essay ExampleGitman(2005) in these words A firms ability to satisfy its short term obligations as they come due(p.58). It is one of the most important financial indicators of a firm. A firm which allow for not be able to satisfy its short term obligations will neither be able to satisfy its long term obligations/debts nor will be able to satisfy its stockholders. Time series analysis of Jools Product incision shows unfavorable results, as out of five indicators four are display negative results. Although current assets have increased in 2009 as compared to 2008 but increase in current liabilities is more as compared to current assets so divisions liquidity has decreased. Increase in inventory turnover shows that division is now more efficient in selling its inventory. While increase in debtors days shows that firm making more credit sales now and is inefficient in collecting its receivables and indicates that money is tied up in debtors. Decrease in creditors days shows that divisions credibility has decreased and its suppliers are allowing it less time to pay them back. Division should publication immediate actions to decrease its current liabilities which will not still increase its liquidity but will also increase its credibility in appear of its suppliers and other stakeholders. Moreover firm should adapt any mechanism to quickly collect its receivables. Asset turnover shows that division has ratio of 1.06 in 2009 which is higher than that in 2008 because the assets have increased but sales has also increased by a greater percentage. It shows that division is more quick in concerting its assets into sales now. profitableness analysis of the Jools Products division shows very favorable results as all of the profit indicators are showing highly favorable results which are not only good for division but will also contribute in overall profitability of Jools. But although the division is profitable but management should bind the problem of in creasing current liabilities and should control operating expenses and receivables as it said by Gibson Even a very profitable entity will find itself smash if it fails to meet its obligations to short term creditors.(p.253) Kitchen Division Category Ratio 2009 2008 Result Liquidity Ratios Current Ratio 2.02 0.4 Favorable Quick Ratio 0.99 0.78 Favorable personal line of credit derangement 60.74 49.87 Favorable Debtor Days 15.52 18.17 Favorable Creditors Days 10.22 12.01 Unfavorable Efficiency Ratios Asset Turnover 2.20 2.33 Unfavorable Net working Capital Turnover 10.13 13.67 Unfavorable Profitability Ratios Net Profit Margin 3.51% 3.27% Favorable Operating Profit Margin 3.88% 3.61% Favorable Return on Assets 7.71% 7.62% Favorable Return on Equity 11.77% 11.90% Unfavorable Critical Analysis- Time series analysis of Jools Kitchen Divisions liquidity shows favorable results. Division has a tidy short term obligations fulfilling ability. Inventory is efficiently sold, less credit sales are allowed and receivables are quickly collected. But in spite of its good liquidity conditions creditors are still allowing less time to pay back which is a matter of concern for management. Efficiency analysis of the