1. Ratio Analysis of The Denver Company Based on the Three different Divisions and their Consolidated Statements Using These Ratios: Current Ratio Quick Ratio Debt to Asset Ratio Return on Sales Return on Assets Return on Equity Days in Accounts Receivable Days of Inventory

2. Division A Current and Quick Ratio: these ratios are very good and show that Division A is very secure in paying off its future incoming debts Debt to Asset Ratio: with a debt of near 40% the division is not too risky and shows the owners have invested more than they have borrowed. Return on Sales / Assets / Equity: with the equity return being higher than the assets return this division is earning more off what it borrows than what it pays. You would also want to look at the industrial average and compare to your ratios. Days of Inventory / Accounts Receivable: These ratios seem to be very good for the division for they are both pretty low but you would want to look at the industry average to confirm this.

3. Division B Current and Quick Ratio: the liquidity of this division is nice and high but you may want to look and make sure you wouldn’t be better off reinvesting some of your extra assets. Debt to Asset Ratio: the debt of this division is very low, so the riskiness if low, and therefore the division’s ability to survive in the long run looks very good. Return on Sales / Assets / Equity: once again, the return on equity is higher than the return on assets, and the sales return is also good, so the profitability of this division looks good without comparing it to past performance or the industry average. Days of Inventory / Accounts Receivable: These ratios are nice and low with Acc. Rec. being lower then division A and Inventory being a little higher but you would want to look at the industry average also.

4. Division C Current and Quick Ratio: the liquidity of this division is quite good and it has a good outlook for its short-run survival Debt to Asset Ratio: the debt ratio shows that shows that this division has a pretty good ability to survive in the long run and that the business is not to risky so that investors would collect something if the company went bankrupt Return on Sales / Assets / Equity: the profitability of this division is pretty good based on these ratios but you would want to look at past company trends and also industry averages. Days of Inventory / Accounts Receivable: these ratios are low and show that the division is functioning well but once again you would want to compare it to past years and to industry averages.

5. Comparison of Division Ratios

6. Weaknesses of the Denver Comp. Division A and Division C, even though their ratios are pretty good, they operate at much of the same pace and are a little behind the production of Division B. Division A Division CDivision B The Days of Inventory are low by an overall comparison, but when you look at the Days in Accounts Receivable, it is considerably higher and therefore you wonder what the industrial average for Days in Inventory and how this ratio compares to Denver’s. Even though you want high liquidity, you don’t want a greater amount of assets then are needed to pay the liabilities. You would want to check and make sure that you are not holding on to assets that you could reinvest to increase your overall assets for the Denver Company

7. Strengths of the Denver Comp. Division B could be considered to be the most beneficial for the Denver Company as a whole. It is the least risky of the the three divisions and it also has the least number of days in Accounts Receivable. Division B The ratios for the consolidation of the three divisions also show that the Denver company is a profitable organization. The Denver Company has a the ability to pay of its incoming future debts at a very high level and is very secure for the future. The Denver Company is very profitable for the investors are in earning more of what they borrow than what they are paying because the overall return on equity is higher than the overall return on assets.