Question

MBA 608 Financial Stmt Analysis/Decision Making Name Financial ratio data is listed below for Prime Engineering Inc. Construct a list of strengths and weaknesses for the firm after analyzing the ratios and note for the firm, the implications of these findings. You should be able identify at least 5 weaknesses and 5 strengths in your narrative. (Reference rubric for other submission requirements.) Prime Engineering Inc. Ratios Ratio Industry 2015 2014 2013 Legokly 3.5x 1.0x 10 days 1.5x 2.0x 0.80x 11 days 2.30x 15 days 17.50x 2.80x 52.00% 4.4x 2.05x 13 days 2.0x 14 days 9.0x 1.50x 34.50% 3.8% 1.5x 12 days 1.8x 13 days 8.60x 1.70x 31.05% 10 days 8.50x 1.70x 40.00% Current Quick Average collection period Inventory turnover Days payable outstanding Fixed asset turnover Total asset turnover Debt ratio Long term debt to total capitalization Times interest earned Fixed charge coverage Gross profit margin Operating profit margin Net profit margin Return on investment Return on equity ducome Progutally 25.53% 9.95x 9.69x 32.10% 8.06% 4.32% 9.21% 11.34% 14.09% 20.00x 5.60x 60.25% 22.05% 12.89% 17.97% 22.05% 18.91% 19.00x 5.45x 55.40% 21.86% 13.50% 18.28% 26.50% 22.33% 17.25x 4.25x 58.50% 20.52% 10.97% 18.35% 30.85% Severage Suor Aanalysis - strenghts weakrestes - Oppotunts -Threads

Answer 1

Strengths...

1.Current ratio indicates the how easy an Enterprise can pay it's short term liability. In the given case company has 4.4 as compared to 2 in the industry.

Formula = Current assets÷current liability

2.Debt ratio indicates the weight of the Enterprise liability relate the assets.In the given case company has the 34.5% as compared to 52% of industry.more debt will result to the more finance expense payable in the future.

3.Gross profit margin indicates the how much profit company makes profit after paying cost of goods sold.In the given case company has the 60.25% as compared to 32.1% of the industry.

Formula = gross profit ÷ net sales

4.Return of equity indicates how company is using it's equity to generate profit. In the given case company is having 22.05% as compared to 11.34% of industry.

5.operating profit margin indicates operating effecieeff of the company. In the given case company is having 22.05% as compared to 8.06% of the industry.

Weaknesses

1.Average collection period of the company is more as compatef to the industry. It results in the liquidity problems of the Enterprise.

2.Inventory turnover ratio indicates the how many times Enterprise is able to sold and replaced in the given period of time. In the given time ratio is less as compared to the industry.

3.fixed asset the total asset turnover ration indicates how efficiency given assets is utilised to generate the sales. In the given case both are less as compared to industry.

4.Days payable outstanding is the number of days company is getting credit facility to pay it's short term obligation less days may create a problem of working capital issues