Week 5 Ratio Analysis Memo

In: Business and Management

Submitted By Maribel01
Words 2288
Pages 10
Week 5 Ratio Analysis Memo
ACC/291

Kudler Foods
Memo
To: CEO-Kudler Foods.
From: Team B
Date: August 22, 2011

This memo is in regard to a recent horizontal and vertical analysis performed on Kudler Foods. The analysis completed was to inform the company of potential interests from different users. The users will be able to use ratios calculated to reveal performance and the current position of the company. The vertical and horizontal analysis is attached along with calculations of liquidity, profitability, and solvency ratios.
The liquidity, profitability, and solvency ratios allow users to identify the financial health of Kudler Foods. The liquidity ratios include the current ratio, acid-test ratio, and inventory turnover. Kudler Fine Foods has no accounts receivables so there was no need for a receivables turnover calculation. The liquidity ratios show that the amount of liquid assets is high in comparison to the industry average. This means that Kudler Foods has assets that can be converted to cash very quickly. Creditors would look at these calculations and be appeased by the ability Kudler Foods has to pay their short-term liabilities.
The profitability ratios calculations included asset turnover, profit margin, return on assets, and return on common stock-holder equity. The ratios calculated show by use of profitability ratios the company financial position is worrisome. This is said because ROA is low. When ROA is low then the company is using less money on more investment. The profit margin is low as well calculated at only .6% showing that Kudler Foods has a low profit at the reporting time.
The solvency ratio was calculated as well. The debt to total assets ratio was .28%, which shows the company is healthy. The times interest earned were 9.8%, which backs up claims of financial health. The solvency ratio shows Kudler Foods can pay back…...

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