Calculate Financial Ratios
In every organization it is imperative to be financially stable to attract the right clientele. Having the stability to maintain an excellent ratio, debt ratio, profit margin, return on asset and maintaining an above average price earning will increase the success of future growth for the company, as well as the industry standard for the similar companies.
It is important to produce the numbers that will attract an audience to invest in your company. Great financial ratios will entice shareholders to invest in the business and could increase sales along with other critical financial data. Riordan Manufacturing and Kudler Fine Food will be analyzed to determine if their financial ratios to include current ratio, debt ratio, profit margin, return on assets, and the average price earning. It is equally important to compare the aforementioned companies to their respective industry standards.
The first step is to examine the current ratio for each company. In order to do so it is to understand how the current ratio is obtained. It is merely an organization’s ability to reimburse its short-term liabilities along with short-term assets. The higher the ratio the more able they can pay-off debts. Companies that are under a score of one can mean they are unable to pay financial obligations. However, having a sub score does not necessarily mean a potential bankruptcy for the company because it is possible to obtain access to money (Investopedia, 2012). Chart 1 below displays current ratio information for each company and its industry comparison.
The next step is to examine the debit ratio for each company and show the importance of it. The debt ratio is mainly used for credit-worthiness of an individual as well as a company. This ratio is applicable to companies because it is a proportion of debt relative to assets and it is used for leverage, show potential risks, and...