2. Ratio Analysis: Division A, B, and C Alissa Levesque Colleen O’Boyle

3. Comparison Key Gold medal – first place Silver medal – second place Bronze medal – third place Don’t sweat Prof. Pelesh... you’ll see...

4. Analysis of Current Ratio Current Ratio = Current Assets Current Liabilities  Division B – 3.3 Division B  Division C – 3.2 Division C  Division A – 2.4 Division A  All current ratios indicate healthy divisions  Rule of thumb – 2:1 ratio is healthy  All above 2  Also known as a liquidity ratio

5. Days Sales Outstanding Days Sales Outstanding = Accounts Receivable (Credit Sales/365) Division B – 31.5 daysDivision B Division C – 36.5 daysDivision C Division A – 42.6 daysDivision A Indicates the number of days of sales that are tied up in accounts receivable as of the end of the accounting period. Therefore, the lower the number, the healthier the division. Obviously, Division A is having the most difficulty receiving payments on time.

6. Inventory Turnovers  Inventory Turnover = Cost of Sales.. Average Inventory  Division B – 5.7 Division B  Division C – 5.7 Division C  Division A – 5.6 Division A  Shows how many times inventory was totally replaced during the year.  All divisions are relatively normal in inventory turnover.  Divisions B and C tied for first place, having the best turnover.

7. Debt to Equity Debt to Equity = Debt capital. Debt capital + Equity Capital  Division B – 9.14% Division B  Division C – 15.35% Division C  Division A – 22.54% Division A  Ratio of debt capital to total permanent capital.  Measure of an entity’s financial risk.  All division are under 50% and thus are normal, but the lower the percent, the healthier the division.

8. Ratio Chart

9. Ratio Graph

10. Conclusions Because Division B has the healthiest ratios in each category, it seems to be the healthiest division. Even though Divisions A and C lag behind Division B, the company as a whole still appears healthy overall because all of the ratios have relatively normal numbers. Advice to the company would be to concentrate on improving Division A because its ratios indicate that it is the weakest division.