Smolira Golf Case Study
The financial ratios for Smolira golf corporation with the year ending figures rather than average values of year 2012.
1) Short term solvency:
a) Current ratio = Current assets/ Current liabilities Year 2011 Year 2012
= 61,886/46,755 = 66,645/53,773 = 1.32 times = 1.24 times
According to this, company have current assets more than 1(i.e. 1.32) as compare to the current liabilities in 2011 but it decreases in 2012 by 1.24 ratio. This is not good sign for management because higher ratio means strong position.
b) Quick ratio = Current assets – inventory / current liabilities Year 2011 …show more content…
It’s not too much higher because it is less than 1 so the company is safe but it’s a dangerous sign for management in future. Management should control the debt equity ratio. c) Equity multiplier = Total assets / total shareholder equity
Year 2011 Year 2012
= 386,581 / 259,826 = 432,379 / 283,606
= 1.48 = 1.53 Equity multiplier shows that the only 1.53% of assets are financed by the shareholder or investors of company in 2012 and it higher than the ratio of 2011. This is positive sign for company because they are very less depended on debt of shareholders. The higher debts mean higher return in the form of dividends or …show more content…
So, its show that it positive sign for financial management and banks or any financial institution could also pay a debt. Management have income before tax 5.72 times greater than interest expenses. So, the company is safe in future and not become any bankruptcy.
e) Cash coverage ratio = EBIT + Non-cash expenses (depreciation) / interest Expenses
= 81,654 + 32,220 /
1) Short term solvency:
a) Current ratio = Current assets/ Current liabilities Year 2011 Year 2012
= 61,886/46,755 = 66,645/53,773 = 1.32 times = 1.24 times
According to this, company have current assets more than 1(i.e. 1.32) as compare to the current liabilities in 2011 but it decreases in 2012 by 1.24 ratio. This is not good sign for management because higher ratio means strong position.
b) Quick ratio = Current assets – inventory / current liabilities Year 2011 …show more content…
It’s not too much higher because it is less than 1 so the company is safe but it’s a dangerous sign for management in future. Management should control the debt equity ratio. c) Equity multiplier = Total assets / total shareholder equity
Year 2011 Year 2012
= 386,581 / 259,826 = 432,379 / 283,606
= 1.48 = 1.53 Equity multiplier shows that the only 1.53% of assets are financed by the shareholder or investors of company in 2012 and it higher than the ratio of 2011. This is positive sign for company because they are very less depended on debt of shareholders. The higher debts mean higher return in the form of dividends or …show more content…
So, its show that it positive sign for financial management and banks or any financial institution could also pay a debt. Management have income before tax 5.72 times greater than interest expenses. So, the company is safe in future and not become any bankruptcy.
e) Cash coverage ratio = EBIT + Non-cash expenses (depreciation) / interest Expenses
= 81,654 + 32,220 /