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Essay / Research Paper Abstract
This 3-page paper focuses on the hypothetical Rainbown Paint Company and determines fiscal health through ratio analysis. In order to determine the analysis, Rainbow is compared to real-life company Sherwin-Williams. Bibliography lists 1 source.
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3 pages (~225 words per page)
File: D0_MTraipai.rtf
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information about other companies in the same industry. To do this properly, well first examine the various ratios of Sherwin-Williams, a major paint (and decorating) company, then go on to
set up some hypothetical ratios for Rainbow Paint and determine how its health stacks up. Unfortunately, for purposes of this paper, Sherwin-Williams
was the only industry company that had comprehensive information regarding ratios. Part of the issue is that most of the companies in question are privately owned, meaning financial information isnt
readily available for this paper. However, with Sherwin-Williams as an example, we can certainly do some type of comparison. A liquidity analysis
of Sherwin-Williams shows the following for the year ending 2002 (source: Morningstar, 2003). 2000 2001 Latest Quarter Current Ratio 1.32 1.39 1.36 Quick Ratio .56 .61 .60 Financial
Leverage 2.44 2.56 2.58 Debt/Equity .41 .39 .38 From a liquidity standpoint, Sherwin-Williams is in pretty good shape. Generally, experts say
that current ratios should not go above 2, whereas quick ratios should stay below one. Although Sherwin-Williams quick ratio has been on the rise, it is still well below the
danger zone. The debt-to-equity ratio is also decreasing nicely, meaning Sherwin-Williams is still in a good position to pay off debts. If
we want to set up a hypothetical situation for Rainbow Paints, wed probably boost the quick and current ratios a little. For one thing, Sherwin- Williams is a publicly owned
company with plenty of investors (and many resources). Rainbow, however, can be assumed to be a private company, no public trading and fewer resources. As a result, the ratios would
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