Question

Financial Ratio Analysis 2.3 Table P2.3 shows financial statements for Nano Networks, Inc. The closing stock price for Nano Network was $56.67 (split adjusted on December 31, 2005. On the basis of the financial data presented, compute the various financial ratios and make an informed analysis of Nano's financial health. | TABLE P2.3 Balance Sheet for Nano Networks, Inc. Dec. 2005 Dec. 2004 U.S. $ (000) U.S. $ (000) (Year) (Year) 20,098 Balance Sheet Summary Cash Securities Receivables Allowances Inventory Current assets Property and equipment, net 158,043 285,116 24,582 632 8,056 377,833 20,588 28.834 10,569 (Continued)

Answer 1

Current ratio=current asset/current liabilities

= 377833/285116=1.32 percent

Quick ratio= current assets-inventory/current liability

=377833-0/285116=1.32 percent

Net working capital = current assets- current liabilities

=377833-285116= 92767

This was a very basic question and let's do analysis for the same.

The current ratio shows how many times over the firm can pay its current debt obligations based on its assets. "Current" usually means a short time period of less than twelve months. A firm should have a ratio more than 1.0 to stay solvent and it is the present case so the firm is solvent and a little more liquid than that. Next ratio is qick ratio i.e,quick ratio is a more stringent test of liquidity than the current ratio. It looks at how well the company can meet its short-term debt obligations without having to sell any of its inventory to do so and the firm does good on this step also. The last is net working capital through which we ate able to see relationship between net working capital and current ratio and the firm is presently performing good on all ratios but however we can't compare the data to 2004 as the firm didn't had any liability so the data can't be compared efficiently with 2004 and from the analysis we can only tell about present situation.