Write a business memorandum to the CEO of Company G in which you, explain and justify for each ratio and trend whether the ratio or trend indicates a strength of the company; a likely weekness, threat, or emerging problem; or a satisfactory condition that management should not view as a strength or weakness.,I want to be sure the correct numbers were used for this memo, the first line of the memo states "for the ninth year" the years in this assignment are years 11 & 12. Thanks! Memorandum TO: C.E.O of company G. SUBJECT: Analysis of Financial Statements Company G DATE: 28/09/2011 Please be informed that based on the records provided for the ninth Year, the following have been noted: 1. The current ratio falls below the industry average, both acid-test ratio and inventory turnover fell below the lowest industry levels. These standards are set by the average of these businesses in this size range. However, based on industry standards, your company is less desirable to creditors. 2. Your receivables turnover is very much higher than the industry average. This means that your company is very good at collecting account sales (strength). However, this does not compensate for a slower inventory turnover (weakness), which means that your company is overstocking inventory and is slow in selling it. It is advisable that you make an analysis of your stocks and categorize them according to their movements (non-moving, slow-moving and fast-moving). 3. Although sales has increased by 9% this year, cost of goods sold cost also increased by 8% and other operating expenses by 11% (selling) and administrative costs by 8%. Over all this does not show a growth but a natural increase in both income and expense. Your company falls in the first quartile (designated Q1 ) Which is not very favorable. It would have been better if the costs are maintained at same level as Year 8. 4. Creditors may not be willing to lend your Company money so easily due to your current standing. Although there may be a few out there who would be willing to take on the risk, the cost would not make it beneficial. It would be advantageous to inquire with equity investors. Your company has a very desirable price earnings ratio and return on equity investments.
Paper#12597 | Written in 18-Jul-2015Price : $25