Ratio Analysis for Springsteen Manufacturing Corporation By: Anthony O’Neill

Division A Current Ratio shows that assets are greater than liabilities. Quick Ratio shows that both cash and inventory are greater than liabilities. There is a 14% return on assets which means that the company can turn this into cash at a decent rate. Division A can collects its accounts receivable within 45 days, thus it must run an easy policy which allows too much time for customers to pay. This divisions inventory turnover is about 63 days

Division B Current Ratio shows that its assets are much greater than its liabilities. It has a better current ratio than Division A. Quick Ratio shows that this division’s cash and inventory covers its liabilities well. There is an 18% return on assets which is slightly higher than Division A. The collection period is 36 days, which is more than a week better than Division A and is therefore more efficient. The inventory turnover is a few days better than Division A.

Division C The current ratio shows that this divisions assets outweigh its liabilities the most of all the divisions. Division C’s quick ratio clearly shows its cash and inventory cover liabilities as well. There is a 47% return on assets which means this division can quickly turn assets into income. The collection period is roughly 33 days, which ensures the greatest efficiency in collecting the customers money. Division C’s inventory turnover is about a week longer than Division B.

Consolidated The current ratio for the company as a whole is 3.88, thus the assets outweigh liabilities. There is an efficient quick ratio that shows how the company’s cash and inventory cover its liabilities. There is a 29% return on assets, thus the company can quickly turn assets into income. It takes Sprinsteen Corp. about 38 days to collect the customers money. The inventory turnover is about 64 days. A high inventory turnover means that the company is not receiving cash from revenue recognition which puts a constraint on the cash flow.

Ratio Analysis RatioDiv. A Div. B Div. C Consolidated Current Ratio Quick Ratio Debt to Assets Return on Sales Return on Assets Return on Equity Ave. Collection Period Ave. Days of Inventory

Ratio Chart

Company Overview Springsteen Manufacturing Corporation is divided into three separate divisions that account for the company as a whole. While Division A and B contain similar data (Division B is a little more efficient), Division C allows Sprinsteen to be a more efficient company overall. Division C’s return on assets was a whopping 47% which boosted consolidated totals at least 10%. However, the company should try to determine a way to receive money faster to ensure constant cash flow for the company.