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Essay / Research Paper Abstract
This 7 page paper performance a financial analysis looking at these two companies, the analysis includes profit margins, current ratio, return on assets and debt ratio. The paper is based in case supplied by the student. The bibliography cites 3 sources.
Page Count:
6 pages (~225 words per page)
File: TS14_TEriorfinance.rtf
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Unformatted sample text from the term paper:
as general assessment is that of ratio analysis. Companies in different industries may have different excepted cost structures, but compassion, even between industries can be used for an investor. In
this paper we will compare the fictitious companies of Riordan Manufacturing and Kudler Fine Foods. Riordan Manufacturing For a company to be successful in the long term it needs
to have a sufficient level of liquidity. A useful ratio for this is the current ratio. The current ratio is calculated by taking the current assets and dividing them by
the current debts. The result is a ratio that indicates how many times the current assets will cover the current liabilities. For example if a company has current assets
of 2 million and current liabilities of 1 million then the ratio would be 2, indicating the current assets can pay the current liabilities twice over. It is often cited
that this ratio should be at least 1.5 to allow for some current assets that may not be liquidated immediately or for those such as debtors that may not
be realized (Elliott and Elliott, 2005). However, for many industries today, such as the high tech industries or the service sector, where there are few current assets, this may be
seen as requiring a lower ratio. Figure 1 Current Ratio Current ratio 2005 2004 Current assets (a) 14,555,092 14,643,456 Current liabilities (b) 6,974,094 6,029,696 Current ratio (a/b) 2.09 2.43
This indicates that the company is highly liquid, indeed, the level may indicate some opportunity costs (Nellis and Parker, 2000). The debt structure is also important. This is the
level of debt against the level of assets, gained by dividing the total debt by the total assets. Figure 2 Debt Ratio Debt ratio 2,005 2,004 Total debt
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