Ratio Analysis By: Bobby Joyce

Division A Strengths: –Division A’s quick ratio is close to the desired 1 to 1 level Firm can efficiently pay off it’s current liabilities and is not wasting resources –Division A’s return on equity is in line with the other divisions of the company –Division A’s average collection period is sufficient Collection period gives adequate time for buyers to pay back accounts receivable –Division A’s average days supplied in inventory is in line with the other divisions Weaknesses: –Division A’s return on assets and return on sales is below both Division B’s and Division C’s ratiosDivision B’s Division C’s Division A is not receiving as much profit in accordance to their assets as Divisions B and C are receiving –Division A’s current ratio is once again the lowest among the divisions Division A might be having a harder time paying off current liabilities than the other divisions –Division A has the highest debt to asset ratio among the three divisions Division A has the highest risk involved Division has a high percentage of debt, a negative sign Potential investors might be warded off by this ratio –Average days supply in inventory is large

Division B Strengths: –Division B has the lowest debt to asset ratio of the three divisions Division B has the lowest risk Potential investors will be drawn to this low risk firm –Division B has the highest return on their assets Division B is making the largest profit on their assets –Division B’s return on sales is the highest between the divisions Division B is apparently doing the best business –Division B’s average collection period and average days supply in inventory fall in line with the other divisions –Division B can sufficiently pay off its current liabilities –Division B’s return on equity is in line with other divisions Weaknesses: –Division B’s quick ratio is not around 1 to 1, however somewhat close Division B might be wasting resources, although minimal –Average days supply in inventory is large Inventory is idle for almost 3 months

Division C Strengths: –Division C has a low debt to asset ratio Low risk involved with this division Low risk will draw potential investors –Higher return on sales and return on assets than Division A –Division C’s return on equity ratio agrees with the other divisions –Division C’s average collection period falls in line with the other divisions –Division C’s average days supply in inventory also agree with the other divisions Weaknesses: –Division C has the highest current ratio This division might be wasting resources –The quick ratio is not around the 1 to 1 target area Division C has trouble paying of its current liabilities –Average days supply in inventory is large Inventory is idle for around 3 months Business may be failing

Corporation Strengths: –The corporations debt to asset ratio is satisfactory The ratio equates to a degree of low risk involved with this corporation The company is not hindered by liabilities –The corporations three divisions are all very consistent with the return on equity ratio –The three divisions have balanced ratios concerning the return on sales and return on assets Illustrating stability within the company –The corporation’s average collection period is satisfactory Ratio is not too high to scare potential buyers, yet low enough to be able to have access to funds Weaknesses: –The corporation’s quick ratio is not around a target ratio of 1 to 1 Corporation has some difficulty paying off its current liabilities –Average days supplied in inventory is large Inventory is idle for almost 3 months Depending on inventory, this could drive away potential buyers

Division A and B Ratios Current Ratio2.85 Quick Ratio1.67 Debt to Asset Ratio0.393 Return on Sales6.6% Return on Assets14.7% Return on Equity22.0% Average Collection Period45 Average Days of Inventory60 Current Ratio3.54 Quick Ratio2.14 Debt to Asset Ratio0.22 Return on Sales9.5% Return on Assets18.3% Return on Equity22.3% Average Collection Period39.2 Average Days of Inventory59.9

Division C & Corporation Ratios Current Ratio4.99 Quick Ratio3.05 Debt to Asset Ratio0.25 Return on Sales8.1% Return on Assets16.2% Return on Equity20.0% Average Collection Period43.3 Average Days of Inventory56.5 Current Ratio3.59 Quick Ratio2.16 Debt to Asset Ratio0.28 Return on Sales8.1% Return on Assets16.5% Return on Equity21.4% Average Collection Period42.5 Average Days of Inventory58.8

Selected Ratios Division A Return on Sales6.6% Return on Assets14.7% Return on Equity22.0% Division B Return on Sales9.5% Return on Assets18.3% Return on Equity22.3% Division C Return on Sales8.1% Return on Assets16.2% Return on Equity20.0%

Ratio Chart