Key West Productions Performance Analysis By, Kelly Quish

The General Industry Industry’s Performance: Current Ratio2.82 Quick Ratio2.32 Debt to Asset Ratio24% Return on Sales8.23% Return on Assets4.81 Return on Equity10.41 Average Collection Period 51 days Average Days of Inventory 23.8 days Now let’s compare these ratios to that of Division A, B, C, and the consolidated calculations for Key West Productions…

Division A Division A  With a Current Ratio of > 3, Division A is not earning sufficient return on their current assets.  Similarly, Division A’s Quick Ratio is 1.83—also high.  With a Debt to Assets Ratio of 39%, Division A is working at a much greater risk than the 24% for the industry. industry  Return on Sales = 5% (Lower than the industry’s 8.23%.)  Division A’s Return on Assets and Return on Equity are both higher than the industry’s overall 4.81 and 10.41, respectively.  The Average Collection Period of 46 days is slightly lower than that of the industry, however is higher than the normal 30. Division A might be experiencing trouble collecting receivables.  The Average Days of Inventory is extremely high at around 60.

Division B & C Division B & C  With a Current Ratio of > 3.5, Divisions B and C are not earning sufficient return on their current assets. (This is higher also higher than that of Division A.)  Divisions B and C’s Quick Ratio are 2.16—very high.  With a Debt to Assets Ratio of 23%, Divisions B and C are working at a lesser risk than the 24% for the industry. industry  Return on Sales = 7% (Lower than the industry’s 8.23%.)  Divisions B and C’s Return on Assets and Return on Equity are both higher than the industry’s overall 4.81 and 10.41, respectively.  The Average Collection Period of 41 days is slightly lower than that of the industry and Division A, however is higher than the normal 30. Showing that Divisions B and C might also be experiencing trouble collecting receivables.  The Average Days of Inventory is very high at around 58.

Consolidated  With a Current Ratio of around 3.4, this is higher than the industry’s 2.8. industry’s  Similarly, the consolidated Quick Ratio is 2.03 which is greater than the recommended 1 but less than that of the industry’s  With a Debt to Assets Ratio of 27%, this shows only slightly greater risk than the 24% for the industry.  Return on Sales = 7% (Lower than the industry’s 8.23%.)  The consolidated Return on Assets and Return on Equity are both 19%--higher than the industry’s overall 4.81 and 10.41, respectively.  The Average Collection Period of 42 days is lower than that of the industry, however is higher than the normal 30. The consolidated shows the company’s probable trouble collecting receivables.  The Average Days of Inventory is extremely high at around 59.

Ratios Division ADivision BDivision CConsolidated A) Current Ratio B) Quick Ratio C) Debt to Asset Ratio39%23% 27% D) Return on Sales (Profit Margin)5%7% E) Return on Assets16%20% 19% F) Return on Equity19%18% 19% G) Average Collection Period H) Average Days of Inventory

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