Question

analysis each line for the two companies and the industry figures 21 to 26

RATIOS ANALYSIS

21) Payout Ratio

0.02%

0

12.60%

22) Revenue/Employee	475.72K	389.29K	775.43K
23)Net Income/Employee	83.17K	18.45K	138.86K
24) Receivable Turnover	23.22	17.42	14.08
25) Inventory Turnover	9.12	8.86	0
26) Asset Turnover	1.49	1.55	0.48

Answer 1

21) Payout Ratio:- It is the ratio of the net income which is paid to the stockholders in the form of dividends by a company. In the question, it is given as 0.02%, 0 and 12.60% for the two companies and industry respectively. This indicates that both the companies have a payout ratio which is below industry norms

Revenue/Employee:- It is the total revenue generated by each employee of the company. Higher the Revenue/Employee, greater financial performance. It is presented as 475.72K, 389.29K, 775.43K for the two companies and industry respectively. It shows that both the companies are not performing as per the industry norms or standards. However, the performance of company 1 is better than that of company 2.

Net Income/Employee:- It is the total income generated by each employee of the company. Higher the Net income /Employee, greater the efficiency of the company. It is presented as 83.17K, 18.45K, 138.86K for the two companies and industry respectively. It shows that both the companies are not performing as per the industry norms or standards. However, the performance of company 1 is better than that of company 2.

Receivable Turnover:- This indicates the efficiency of a company in the utilization of its credit and collecting debts. The companies and industry figures are 23.22, 17.42 and 14.08 respectively. This indicates that the performance of company 2 is better than company 1 as it has lesser time to receive the debts or payments. However, the industry normal is still not met.

Inventory Turnover:- It indicates how fast the inventory is sold by the company. Looking at the states, Company 2 is performing better than company 1.

Asset Turnover:- this indicates what income is generated by the company by spending $1 of the assets. Thus the performance of company 2 is again better than that of company 1, however, both the companies are performing better than the industry figures.