Since its inception in 1971, Cutbacks has been a model for what many aspire to but often come up short. The following is a brief overview of the company's finances, including a comparative and ratio analysis to measure profitability and liquidity. Current Ratio Current ratio Is a common financial ratio to measure the liquidity of a corporation. The short term ability Is measured, of a company to pay the maturing obligations, and meet unexpected need for cash (Skies, Kismet, , 2011). Current assets divided by current liabilities is the current ratio formula.
Between working UAPITA and current assets, current assets is the more dependable formula (Skies, Kismet, , 2011). Two companies may have very similar working capital and yet have drastically different current ratios. For every dollar of the current ratio, depicts how much current assets, per that dollar the company has (Soles, Kismet, , 201 1 The negative fact of the current ratio is that It doesn't explain where the asset is. It can be a large portion in inventory which is not the same as having a complete asset.
A dollar in inventory does not pay as quickly as a dollar in ash. Cutbacks current assets are 1 1 ,516. 7 (In millions), and the liabilities is 7,034. 4 (Cutbacks, 2013). The current ratio is 1. 63, for every dollar the asset is 1. 63 for the corporation. Return on Assets This ratio Illustrates how effective management Is at generating profit from the company's assets. Return on assets is calculated by dividing net income over total assets and multiplying that figure by 100. Net income and total assets data can be found on the balance sheet from a biblically traded companies ASK report.
Return n assets when simplified shows how many additional dollars the company assists generate. Cutbacks return on asset figure Is . 45673. Meaning each dollar in asset generates roughly $. 45 of Income In 2013. By this figure Cutbacks management did a Commonly referred to as return on net worth, this ratio illustrates profitability by how well a company increases the value of common stock holder investments. These increases are typically re-invested in the company or paid in dividends. To calculate ROE net income is divided by common share holder equity and multiplied by 100.
Cutbacks ROE figure for 2013 is $1 . 17350. For each dollar invested by common stock holders Cutbacks generates Just over $1. 17. In 2012 the ROE ratio was a whopping $26. 59. A sharp drop in equity and an equally staggering increase in liabilities in 2013 lead to both profitability figures to be very low by historical and industry standards for Cutbacks. It would be safe to say that if these events occurred during the start up phase off business they likely would not survive. Inventory Turnover Inventory turnover is an important part of any business.
This information illustrates how much capital the company has used in comparison to how much inventory it has sold. Company leaders use this information to make financial decisions. This concept is condensed by Jon Scribbled on Indistinguishableness. Com as "The inventory turnover rate measures the number of times you have turned your inventory during the past 12 months" (Scribbled, 2014). The formula for the turnover ratio is the cost of goods sold divided by the average inventory. The Cutbacks company leaders use this information as well.